03 February 2020 Weekly Analysis
GCMAsia Weekly Report: January 27 – 31
Market Review (Forex): January 27 – 31
US Dollar
The dollar index which measure its value against a basket of six major currency slumped in last week following a string of bleak U.S. data which pointed to weak economic growth in U.S. while closing its market at the price of 97.25. In addition, the U.S stock market tumble amid to the fears upon the outbreak of coronavirus, which prompting the investors to shift-out their portfolio from the United Stated while spurring a significant selloff the US Dollar.
With regards of the U.S data, Greenback has been plagued with concerns over slowing economic momentum in the United States following the bleak data were released. According to Census Bureau, U.S. New Home Sales notched down from the previous reading of 697K to 694K, missing the economist forecast of 730K while the U.S. Core Durable Goods Order for last month came in at only -0.1%, lower than the market forecast at 0.2%. Besides that, U.S. Pending Home Sales for the month of January fell to -4.9% from the previous reading of 1.2%, missing the economist forecast at 0.5%. In fact, U.S. Initial Jobless Claims came in at 216K, weaker than the forecast at 215K. However, according to Bureau of Economic Analysis, Gross Domestic Product (GDP) from the U.S. region came in at 2.1%, which shown no deviation from the previous expectation. Meanwhile, the U.S. Central Bank remained its interest rate at 1.75% which claiming that the economic growth in the U.S. remained moderate and the job market is still considered strong. Such positive sentiment limited the losses experienced by the US Dollar. Nonetheless, Federal Reserve Chairman Jay Powell expressed concerns about the economic fallout of the coronavirus while claiming that US would continue to scrutinize the latest updates with regards of the outbreak of coronavirus in order to decide the future monetary policy.
On the coronavirus epidemic front, according to CNBC, the coronavirus has so far taken 304 lives, affecting 14,380 people in the world. Besides that, it has resulted in the banning of transport and extended holidays in China to confront the threat. According to latest news, U.S airlines have announced plans to cancel the number of flights which they are operating to and from China as the fears upon the outbreak of the coronavirus. Investors suspect that the outbreak of coronavirus would definitely destroy the world economy, which prompting a significant selloff for the equity market in the United Stated while diminishing the demand for the US Dollar as investors around the world start to shift money out of stocks in the United States while converting into the cash. At this time, market participants remain fixated upon ongoing headlines of the coronavirus as well as economic data from the United Stated in order to gauge the likelihood movement for the dollar index.
USD/JPY
Pair of USD/JPY was traded lower last week while ending last Friday session at the price of 108.51. Likewise, Japanese Yen received bullish momentum amid to the risk-off sentiment in the FX market. The outbreak of the coronavirus had stoked a shift in sentiment toward safe-haven asset, while insinuating the demand for the safe-haven currency such as Japanese Yen.
EUR/USD
Pair of EUR/USD surged last week while closing last Friday’s trading session with the price of 1.1080. The overall bullish momentum for the pair was mostly due to the weakness in the rival currencies, especially in U.S dollar. Moreover, the Euro received a significant demand following the positive jobs data was released. According to Destatis, Germany Unemployment Change notched down from the preliminary reading of 8K to -2K, better than the economist forecast of 5K. However, the gains experienced by the Euro was limited following the Germany Ifo Business Climate Index came in at only 95.9, missing the economist forecast of 97.0. Nonetheless, at this time investors would continue to scrutinize the latest updates with regards of the trade negotiation between UK and Europe in order to receive a further trading signal for the pair.
GBP/USD
The pair of GBP/USD was traded higher throughout the entire week while closing its market at 1.3205. Last week, pound sterling was managed to recovered part of its losses and even goes back into its bullish trend amid unexpected announcement from Bank of England (BoE). Prior to the interest rate decision, investors was generally forecasted BoE will adjust its interest rate downward in order to support its economy long term growth. However, the result of interest rate decision was against the investor appetite and expectation where board of BoE chose to remain its interest rate unchanged at 0.75%. Moreover, BoE monetary policy statement also noted that although UK economy growth was slowed in year 2019 due to uncertainties over Brexit deadlock, however steady growth pace can be expected now in the coming next few years. Nonetheless, BoE does not rule out the possibility of further rate cut in the future if the Brexit issue goes against the favor of UK economy. Moreover, UK has officially enter into the transition period where UK and Europe will have to come out with an arrangement concern about future trade relationship and so on.
Market Review (Commodities): January 27 – 31
GOLD
Gold price was traded higher while closing its market on Friday at $1588.70 a troy ounce. Earlier last week, bearish momentum was continued to weigh on this yellow metal as majority of the central banks gave hawkish stance with regard to the future growth expectation. However, a bleak of downbeat economic data from United States such as Core Durable Goods Orders and Pending Home Sales lifted up the investor’s risk off sentiment, urging the investors to buy in all portion of safe haven asset. Moreover, the outbreak of coronavirus over the whole world also further lifted up the market worries and eventually pushing the price of this yellow metal upward.
CrudeOIL
Oil price was traded lower while closing last week market session with $51.45 per barrel. The oil price was traded lower by the investors as recent outbreak of coronavirus tampered the future outlook of crude oil market.
According to the latest news, coronavirus has been spread to more countries and death toll has climbed to 360 people. Countries around the world have started to isolate patients who are suspicious suffering from new coronavirus, while World Health Organization (WHO) also declared that world is now facing a global emergency. Majority of the countries have stopped the airlines operation where direct flights to China are now being suspended, travel warnings are also issued by government in the purpose of controlling the spread of this new virus. Hence, suspension of flights lifted up the market bearish expectation toward the crude oil market as demand of this black commodity will likely reduce significantly. Moreover, the outbreak of virus also act as a drag on global economy growth during the first three months of year 2020 and likely lead to longer period of subdued growth.
In addition, crude oil price dropped further after US EIA crude oil inventories data showed a stockpile in last week. According to EIA institute, crude oil inventories level was came in at 3.548M, unexpectedly higher than economist forecast at 0.482M, indicating that demand of crude oil has weaken which believingly due to the recent outbreak of new virus. Besides, there is a report show that the largest oil exporter, Saudi Arabia had significantly raised its crude sales to China, beating Russia for the top Chinese supplier for the first time in four years. However, market are now still awaiting for the OPEC + meeting which scheduled on the beginning of March in order to scrutinize the oil supply level in the future. The news regarding to the coronavirus also must not be neglected as it also act as an important catalyst to determine the direction of crude oil.
Weekly Outlook: February 3 – 7
For the week ahead, investors will pay attention upon key event such as ISM Manufacturing PMI and NFP data which will be announced by US in order to further gauge the currencies movement.
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: February 3 – 7
| Monday, February 3 |
Data CNY – Caixin Manufacturing PMI (Jan) EUR – German Manufacturing PMI (Jan) GBP – Manufacturing PMI (Jan) USD – ISM Manufacturing PMI (Jan)
Events N/A
|
| Tuesday, February 4 |
Data GBP – Construction PMI (Jan)
Events AUD– RBA Interest Rate Decision (Feb) |
| Wednesday, February 5 |
Data CrudeOIL – API Weekly Crude Oil Stock NZD – Employment Change (QoQ) (Q4) GBP – Composite PMI (Jan) GBP – Services PMI (Jan) USD – ADP Nonfarm Employment Change (Jan) USD – ISM Non-Manufacturing PMI (Jan) CrudeOIL – Crude Oil Inventories
Events N/A
|
|
Thursday, February 6 |
Data AUD – Retail Sales (MoM) (Dec) USD – Initial Jobless Claims
Events N/A |
|
Friday, February 7
|
Data USD – Nonfarm Payrolls (Jan) USD – Unemployment Rate (Jan) CAD – Employment Change (Jan) CAD – Ivey PMI (Jan) CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events N/A |