2 November 2020                  Weekly Analysis

GCMAsia Weekly Report: November 2 – 6

 

Market Review (Forex): October 26 – 30

US Dollar

The dollar index which traded against a basket of six major currency pairs managed to recover its losses throughout the entire last week amid hopes over stimulus plan faded while a series of upbeat data supported the gains of dollar.

 

Earlier last week, dollar market turned scented while receiving huge bullish momentum as the lack of progress in US second coronavirus relief package made traders cautious. As of now, most of the experts and investors are not expecting a stimulus aid would be implemented before the US election because the impasses between Democrats and Republican remained while no tolerance were being shown by both sides. Both parties were holding different opinion toward the amount in the next round of stimulus plan. As it is getting closer to the US Presidential Election, markets are now eyeing on the contest between Joe Biden and Donald Trump in order to gauge the further direction of US Dollar. Nonetheless, a Coronavirus relief plan is necessary to be implemented in US as soon as possible amid the US economy still struggling by the negative impact of the pandemic, especially the small and medium businesses. In data front, dollar gains were boosted even higher data such as US GDP and Initial Jobless Claims showed a better-than-expected reading. However, US economy outlook was remains blurred as the pandemic of Covid-19 continue spread across the US region while the number of infected cases remain at high level.

 

With the combination of uncertainty in stimulus and the upcoming election, investors are expected to continue focus on the Presidential Contest between Joe Biden and Donald Trump while also putting their attention over the stimulus plan.

 

USD/JPY

The pair of USD/JPY recorded losses throughout the entire last week while ending last Friday session at the price of 104.65. The main contribution of bearish momentum on this currency pair were totally from the strengthening of US dollar and the safe-haven characteristics of Japanese Yen. As of now, market uncertainties over the US Presidential Election, Brexit and resurgence of pandemic in Eurozone urged market to shift a significant portion of their portfolio holding to safe-haven Japanese Yen to protect the values.

 

EUR/USD

The pair of EUR/USD plunged throughout the week while ending last week session at the price of 1.1646 amid resurgence of Covid-19 in Eurozone countries such as France and Germany.  According to the latest statistics, the countries that recorded the highest infected cases in Eurozone were belonged to France and Spain. Last week, France, Germany and Belgium have decided to implement another round of lockdown measure in their country respectively after the number of cases surging significantly while showing out of control’s sign. As stricter measure is being implementing in Eurozone, market participants believe that the economy will start to slow down again as part of economy activities is being forced to halt during lockdown period.

 

GBP/USD

The pair of GBP/USD was having mixed pattern throughout the previous week while ending its market at 1.2948. As of now, the direction of pound sterling is still mainly driven by the development of Brexit. Last week, some optimism over Brexit trade talk have lifted the sentiment of pound’s market. According to the latest round or trade talk, trade and security negotiations between the UK and the EU are making good progress, said by Ursula von der Leyen. Moreover, David Frost and Michel Barnier commented that they are working hard in Brexit’s negotiation in order to avoid hard Brexit after transition period ended. Despite, there are some major issues such as fisheries remain unsolved, while needing more time and further talks to achieve consensus over these problems.

 

 Review (Commodities): October 26 – 30

GOLD

Gold price plunged tremendously throughout last week while ending the week at a loss with the price of $1878.75 a troy ounce amid impasses of US stimulus plan and optimism of Brexit progress. Last week, gold price received some huge bearish momentum as the hopes of stimulus aid faded after US President Donald Trump and Nancy Pelosi revealed that stimulus plan will be passes after US Presidential Election finished. As low possibility of implementing a stimulus plan in short term, it has eventually triggered huge sell-off pressure in gold market as inflation pressures are expected to remain at low level with a backdrop of lack of market stimulus. Besides, progress of Brexit talk has exerted even more bearish momentum in gold market as Hard-Brexit possibility faded.

 

CrudeOIL

The price of crude oil plunged throughout the week while closing last Friday session with the price of $35.75 per barrel amid surging of Covid-19 around the globe and disappointed inventory data.

 

Earlier last week, crude oil price was traded lower after US API data showed a bigger build than expected in crude oil inventories of 4.577 million barrels for the week ending October 23.  Besides, stockpiles condition was also noticed in the EIA Crude Oil Inventory data with a reading of 4.320M, higher than the economist forecast at 1.230M, showing that the supply glut worsen. Moreover, crude oil price collapsed again after France and Germany announced new lockdowns in response to surging Covid-19 cases. With a backdrop of lockdown measure in Eurozone, major economy activities are expecting to stop while causing lesser demand from these countries toward the oil market. Besides, some OPEC members appear to be reluctant to extend the production cuts that were supposed to be relaxed by 2 million bpd beginning next year January as further oil production cut plan does not sustain their economies.

 

Although the outlook for the commodity remains negative while no signs of strong recovery, Investors will continue to focus on inventories data and the development of pandemic to determine the direction for the commodity.

 

Weekly Outlook: November 2 – 6

For the week ahead, investors would continue to focus on the ongoing developments on US Presidential Election and economic data such as Fed interest rate decision and NFP to determine further direction. Besides that, the ongoing situation with coronavirus will also be in the eyes of investors.

 

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: November 2 – 6

 

Time Market Event Actual Forecast Previous
Monday – 2hb November 2020
16:55 EUR German Manufacturing PMI (Oct) 58.0 58.0
17:30 GBP Manufacturing PMI (Oct) 53.3 53.3
23:00 USD ISM Manufacturing PMI (Oct) 55.8 55.4
Tuesday – 3hb November 2020
11:30 AUD RBA Interest Rate Decision (Nov) 0.10% 0.25%
11:30 AUD RBA Rate Statement
21:00 USD U.S. Presidential Election
Wednesday – 4hb November 2020
05:45 NZD Employment Change (QoQ) (Q3) -0.8% -0.4%
07:50 JPY BoJ Monetary Policy Statement
08:30 AUD Retail Sales (MoM) (Sep) -1.5% -4.0%
17:30 GBP Services PMI (Oct) 52.2 52.3
21:15 USD ADP Nonfarm Employment Change (Oct) 650K 749K
23:00 USD ISM Non-Manufacturing PMI (Oct) 57.5 57.8
23:30 CrudeOIL Crude Oil Inventories 4.320M
Thursday – 5hb November 2020
17:30 GBP Construction PMI (Oct) 55.0 56.8
19:00 GBP BoE MPC Meeting Minutes
20:00 GBP BoE Interest Rate Decision (Nov) 0.10% 0.10%
21:30 USD Initial Jobless Claims 733K 751K
Friday – 6hb November 2020
03:00 USD Fed Interest Rate Decision 0.25%
03:30 USD FOMC Press Conference
21:30 USD Nonfarm Payrolls (Oct) 600K 661K
21:30 USD Unemployment Rate (Oct) 7.6% 7.9%
21:30 CAD Employment Change (Oct) -7.5K 378.2K
23:00 CAD Ivey PMI (Oct) 54.3