1 June 2020                 Weekly Analysis

GCMAsia Weekly Report: June 1 – 6

Market Review (Forex): May 25 – 30

US Dollar

The dollar index which traded against a basket of six major currency pairs slumped last week over the backdrop of the string of bleak data as well as the rising geopolitical risks from the United States due to the death of George Floyd, man who died as a white Minneapolis police officer knelt on his neck, has become a wave of outrage that has many cities braced for another night of violence. Such negative sentiment had been prompting investors to shift their portfolio out from the U.S. region to other countries. The Dollar Index was closing its price on last Friday session at the price of 98.243.

For last week, the economic data from United States were mostly dominated by dismal despite some of the data were fared better than expectation. According to Conference Board, the U.S. CB Consumer Confidence notched down from the previous reading of 85.7 to 86.6, missing the market forecast at 88.0, while the U.S. Core Durable Goods Order for last month had also massively declined from the preliminary reading of -1.7% to -7.4%. Moreover, Bureau of Economic Analysis had reported that the U.S. Gross Domestic Product (GDP) for last quarter had reduced from previous reading at 2.1% to -5.0%, which also worse than the market forecast at -4.8%. Similarly, the U.S. Initial Jobless Claims came in at 2,123K, missing the economic forecast at 2,100K while weighing positive prospect for the U.S. Nonfarm Payroll data which will be released on 5th June 2020, reported by the Department of Labor. Such negative data had diminished the market optimism toward the economic progression in the United States, which sapping the demand for the US Dollar.

 

R.I.P George Floyd. After Floyd’s death, demonstration and protests in the Minneapolis-Saint Paul area had resumed in order to demand justice for George Floyd, who was killed by a member of the Minneapolis police force. Nonetheless, U.S. President Donald Trump, who forged his political identity in racist conspiracy theories about Barack Obama’s birthplace, has proved unable to articulate the accumulated pain of black Americans over 400 years of slavery, segregation and police brutality. Instead he has resorted to a series of tweets that critics found divisive, inflammatory and self-serving. On Friday, he called the protesters as “thugs” and warned on Twitter that: “when the looting starts, the shooting starts”.

 

On the trade war front, the US President Donald Trump announced that the U.S administration will take action to cancel the Hong Kong’s preferential treatment as a separate custom following China parliament unanimously agreed to impose national security law in Hong Kong. He also reiterated that they will impose sanctions against the China and Hong Kong official. In such sanction, U.S. government will ban the visa of Chinese Students and expel them from United States. In the financial markets, the U.S. measures against China including to delist those Chinese companies from all US exchanges if they fail to abide by US financial disclosure laws.

 

USD/JPY

Pair of USD/JPY was traded within a range last week while ending last Friday session at the price of 107.75.  Meanwhile, the global financial markets have been caught in a tug-of-war between optimism and pessimism about the global outlook. Some investors are speculating on hopes of positive prospect for global economic growth following few countries had reopened their economy, though others worry the threat of the U.S. sanctions against China would cause a retaliation from the Chinese government.  Nonetheless, at this time investors would continue to scrutinize the latest development with regards of the coronavirus pandemic crisis and U.S.-China trade relation in order to receive further trading signals.

 

EUR/USD

Pair of EUR/USD surged on last week while closing last Friday’s trading session with the price of 1.1099. The overall bullish momentum of the pair was mostly due to the weakening in the rival currencies, especially in US Dollar. Besides, the Euro received further bullish momentum following the European Union’s announced economic stimulus plan with a 750 billion-euro recovery fund in order to revive the euro zone. In fact, the euro extend its gains over the backdrop of the positive economic data from Germany. According to Ifo Institute for Economic Research, Germany Ifo Business Climate Index had increased from the previous reading of 74.2 to 79.5, better than the market forecast at 78.3.

 

GBP/USD

The pair of GBP/USD surged on last week while closing its market at 1.2363. The overall bullish momentum for the pair was mainly due to the depreciation of the US Dollar. In fact, the Pound Sterling extend its gains following the UK Prime Minister Boris Johnson said on last Thursday that the Britain’s coronavirus lockdown would ease next week, which dialing up the market optimism toward the economic progression in the UK. However, the gains experienced by the Pound Sterling was limited due to the uncertainty with regards of the post-Brexit deal. Besides, the Bank of England claimed that the Britain’s economy is unlikely to recover fully in the next two to three years, which also weighing the demand for the Pound Sterling.

 

Market Review (Commodities): May 25 – 30

GOLD

Gold price was traded higher in overall last week while closing its market on Friday at $1729.30 a troy ounce. The safe-haven commodity gold surged amid the renewed trade tensions between U.S. and China had prompted the risk-off sentiment in the FX market. The U.S President Donald Trump, said that the United States administration is rescinding several special considerations for Hong Kong in retaliation against Beijing’s move to pass new security laws. Besides, the gold market received further bullish momentum following the Federal Reserve Chair Jay Powell provided dovish statement toward the U.S. economy. According to CNBC, he claimed that the full U.S. economic recovery from the coronavirus pandemic could not be attained until people felt confidence to resume living like before the pandemic.

 

CrudeOIL

The crude oil price surged on last week while closing last Friday session with $35.59 per barrels. The oil market was traded higher on last week as market participants expected that the oil production cut from OPEC and its allies which resumed on 1st May would able to tackle a supply glut due to the coronavirus crisis. Besides, the latest survey of oil drilling patches by industry firm Baker Hughes on Friday showed a reduction of only 15 oil rigs this week. Such data would indicate that the oil supply from the U.S. region would continually decline in future, which spurring positive prospect for the crude oil price. Nonetheless, the gains experienced by the crude oil was limited following the negative inventory data was released. According to Energy Information Administration (EIA), the U.S. Crude Oil inventories had increased from the previous reading of -4.983M to 7.928M, missing the economist forecast at -1.944M.

 

Weekly Outlook: June 1 – 6

For the week ahead, investors would have to scrutinize the latest developments with regards of the outbreak of the coronavirus, trade tensions between U.S. and China and also crucial economic data such Nonfarm Payrolls from the U.S. region in order to receive further trading signals.

As for oil traders, they will be eyeing on US inventories level reported by API and EIA to gauge the strength of crude demand for world’s largest oil consumer.

 

Highlighted economy data and events for the week: June 1 – 6

Time Market Event Actual Forecast Previous
Monday – 1st June 2020
15:55 EUR German Manufacturing PMI (May) 36.8 34.5
16:30 GBP Manufacturing PMI (May) 40.7 40.6
22:00 USD ISM Manufacturing PMI (May) 43.0 41.5
Tuesday – 2nd June 2020
12:30 AUD RBA Interest Rate Decision (Jun) 0.25% 0.25%
Wednesday – 3rd June 2020
09:30 AUD GDP (QoQ) (Q1) -0.3% 0.5%
15:55 EUR German Unemployment Change (May) 195K 373K
16:30 GBP Services PMI (May) 28.0 27.8
20:15 USD ADP Nonfarm Employment Change (May) -9,000K -20,236K
22:00 USD ISM Non-Manufacturing PMI (May) 44.0 41.8
22:00 CAD BoC Interest Rate Decision 0.25% 0.25%
22:30 CrudeOIL Crude Oil Inventories -1.944M 7.928M
Thursday – 4th June 2020
09:30 AUD Retail Sales (MoM) (Apr) -17.9% 8.5%
16:30 GBP Construction PMI (May) 30.0 8.2
19:45 EUR ECB Interest Rate Decision (Jun) 0.00% 0.00%
20:30 USD Initial Jobless Claims 2,123K
20:30 EUR ECB Press Conference
Friday– 5th June 2020
20:30 USD Nonfarm Payrolls (May) -8,250K -20,500K
20:30 USD Unemployment Rate (May) 19.7% 14.7%
20:30 CAD Employment Change (May) -500.0K -1,993.8K
22:00 CAD Ivey PMI (May) 22.8
01:00

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CrudeOIL US Baker Hughes Oil Rig Count 222