1 October 2018 Weekly Analysis
GCMAsia Weekly Report: October 1 – 5
Market Review (Forex): September 24 – September 28
US Dollar
The US dollar had undergone sharp appreciation throughout the week amid the Fed’s interest rate hike which created positive sentiment for the dollar and boosted investors’ confidence towards the greenback. The dollar index increased during the week while closing the price at 94.75 last Friday.
The interest rate hike on Thursday morning Asian hours which increased by 25 basis point from previous 2.00% to 2.25% had since put dollar back on its safe-haven asset place while investors are expecting further gradual rate hike until the year 2020. Further boosting the dollar index was the releasement of US economic data GDP which successful hitting the forecasted value of 4.2%.
Overall, the dollar continues to strengthen against a basket of six major currencies as investors shift their portfolio to pro-USD amid the positive sentiment from the rate hike and further hikes to be expected until year 2020. Investors confidence grew thus pushing the dollar price upwards for the past week.
USD/JPY
USDJPY pair rose throughout last week before closing at 113.67 hitting a nine-months high during late Friday trading session. Bank of Japan (BOJ) Governor Haruhiko Kuroda stated on last Tuesday that the central bank must focus on the side effects of its stimulus program (QE) as current inflation remains further from the BOJ’s target. Kuroda also stated that before entering the phase to normalize its monetary policy and increasing interest rate, the country must first achieve its target of 2 percent inflation as soon as possible.
EUR/USD
EURUSD fell throughout last week before closing at 1.1602 during last week Friday session amid Italy’s budget crisis where they decided to settle with 2.4% deficit target for the following year which triggered a sell-off in the Italian bonds. The pair may suffer further losses if the Italian bonds extend its depreciation.
GBP/USD
GBPUSD overall declined in value throughout last week before closing at 1.3027 during late Friday trading session as UK Prime Minister Theresa May determination for a no-deal Brexit grows stronger. Concerns on the ongoing Brexit negotiations created a negative sentiment for the pound which caused it to fell last week. Investors will focus mainly on Brexit headlines for a clearer direction for the pound.
Market Review (Commodities): September 24 – September 28
GOLD
Gold price plunged throughout the week as dollar strengthened amid Fed rate hike last week. The yellow metal managed to recover its losses while closing last week market at to $1191.50 a troy ounce.
The gold price was seen falling as the dollar continued its bullish momentum amid Fed’s interest rate decision where investors sentiment expects future rate hike until the year 2020. Gold price fell the whole week but managed to regain some of its losses on Friday as bullish investors protected their position when gold fell to a month low.
Crude Oil
The price of crude oil was increasing throughout last week as Iran sanctions deadline came closing in. The commodity price surged to $73.47 per barrel during last Friday’s session.
The crude oil market enjoyed its gains as OPEC troubles with its decline in output due to the Iran sanctions. US President Donald Trump contacted OPEC leader, Saudi Arabia King Salman on the weekend to discuss the efforts to ensure stable market and global economic growth. Before that, Trump criticized OPEC for gradual price increase and demanded that they increase output to ease down the market before US mid-term elections.
Overall, crude oil price can be seen rising for the past week as positive sentiment surrounds the oil market due to confidence that global oil supply will fall from the Iran sanctions. Discussions were made between OPEC producers and non-OPEC producers to increase global crude supply by 500,000 barrel per day but was not taken into effect still, thus prolonging investors confidence towards the oil price.
Weekly Outlook: October 1 – 5
For the week ahead, investors will focus on the release of various economics data especially US Non-farm Payroll (NFP) this Friday. Non-Farm Payroll which measure the unemployment rate for US excluding farm sectors is a major price indicator for the dollar.
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: October 1 – 5
| Monday, October 1 |
Data JPY – Tankan Large Non-Manufacturers Index (Q3) EUR – German Manufacturing PMI (Sep) GBP – Manufacturing PMI (Sep) USD – ISM Manufacturing PMI (Sep)
Events N/A
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| Tuesday, October 2 |
Data AUD – RBA Interest Rate Decision (Oct)
Events AUD – RBA Rate Statement
|
| Wednesday, October 3 |
Data GBP – Services PMI (Sep) USD – ADP Nonfarm Employment Change (Sep) USD – ISM Non-Manufacturing Employment (Sep) USD – ISM Non-Manufacturing PMI (Sep) CrudeOIL – Crude Oil Inventories
Events USD – Fed Chair Powell Speaks
|
| Thursday, October 4 |
Data USD – Initial Jobless Claims USD – Factory Orders (MoM) (Aug) CAD – Ivey PMI (Sep)
Events N/A
|
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Friday, October 5
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Data AUD – Retail Sales (MoM) (Aug) USD – Average Hourly Earnings (MoM) (Sep) USD – Nonfarm Payrolls (Sep) USD – Unemployment Rate (Sep) CAD – Employment Change (Sep)
Events N/A
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