3 August 2020             Weekly Analysis

GCMAsia Weekly Report: Aug 03 – Aug 07

Market Review (Forex): July 27 – 31

US Dollar

Dollar index which gauges its value against a basket of six major currencies crumbled throughout the entire last week as investors were expecting a dovish tone of statement from Federal Reserve in the midst of virus’s pandemic, which supported by a series of bleak economic data from the nation.

 

On data front, US country was lack of economic data that indicating a strong economic recovery might be happened in near term. In the earlier last week, data such as Core Durable Goods Orders and CB Consumer Confidence were reported with a reading of 3.3% and 92.6 respectively, averagely lower than the economist forecast of 3.5% and 94.5, providing that the underlying pressure of inflation in US economy remains vulnerable and weak amid consumer purchasing behavior eased. However, dollar managed to limit its losses momentum when it closes to the end of last week as the shrinking of US economy seemingly not as bad as how economist anticipated. According to the Bureau of Economic Analysis, US second quarter GDP came in at -32.9%, slightly better than the forecast of economist at -34.1%, while the US economy is still being haunted by the full damage of Covid-19.

 

Other than that, the dollar’s movement on last week was also affected significantly by the Federal Reserve monetary policy decision. In the Fed meeting, board of Members unanimously agreed to hold its interest rate steady between the regions of 0.00% to 0.25% amid tepid outlook of US economy. Besides, the chairman of Federal Reserve Jerome Powell has also reiterated their commitment on using full range of tools to support the economy from continues stalling. Besides, Jerome Powell also revealed that their existing monetary policy will remain loosening until the economy has weathered the event of covid-19 and is on track to achieve maximum employment rate and stable growing of inflation pressure. Nonetheless, the path of economy is now depend on the course of virus, where investors would continue to eye on the latest updates with regards to the vaccine as well as the relationship between United States and China in order to gauge the likelihood movement for the pair.

 

USD/JPY

The pair of USD/JPY was having large movement last week while ending last Friday session at the price of 105.85. This pair has received huge bearish momentum in the earlier of last week as disappointed economic data from US urged the investors to continue sell off their dollar’s holdings and fled into other more potential currency market. However, the pair of USD/JPY managed to make a great comeback after a resurgence of pandemic happened in Japan. As of now, most of the major cities in Japan have been forced to reimpose movement restriction in order to limit the negative effect of virus.

 

EUR/USD

The pair of EUR/USD surged on last week while closing last Friday’s trading session with the price of 1.1905. Last week, euro currency was largely bought in by the market participants as Europe economy’s strength is obviously undergoing strong recovery, which can be seen in the recent positive economic data such as German Unemployment Change and Europe CPI. According to the data statistics from EU, German Unemployment Change and Europe CPI came in at -18K and 0.4% while the economist forecast of reading were 43k and 0.2%. Moreover, the single currency managed to continue ride on bullish momentum due to the weakening of its rival currency especially greenback as US economy showed no sign of recovering from novel of covid-19.

 

GBP/USD

The pair of GBP/USD soared on last week while closing its market at 1.3080. Last week, the surge in this pair was mainly contributed by the depreciation of US dollar as its economy still remains vulnerable and weak amidst the outbreak of Covid-19. However, pound sterling market still exists of significant uncertainty risk which came from the deadlock of Post-Brexit negotiation. According to the latest news, Brussel and Britain have scheduled more trade negotiation all the way until 2 October, with a hope to endorse an agreement before the transition period expired. However, the major problem in Post-Brexit trade deal that need to be resolved as of now is stills the fishing ‘conflict’ with French where UK is not accepting any boat from EU in its water.

 

Market Review (Commodities): July 27 – 31

GOLD

Gold price successfully extend its gains last week while closing its market on Friday at $1984.95 per troy ounce. The demand of this safe haven commodity increased as US reported higher number of infection in last week, fading the market hopes over the ease of pandemic in US country. Besides, tit-for-tat retaliation between US and China also prompted the investors to escape from riskier asset by holding more yellow metal in their portfolio. However, the surge of this yellow metal was limited by the investor profit taking behavior after this commodity hit the historical high level. As of now, market participant continue eye on the development of vaccine and more talks between US and China to scrutinize the further direction of gold price.

 

CrudeOIL

The crude oil price was having mixed pattern last week while closing last Friday session with $40.40 per barrel as market worries over the pandemic continue to weigh on this black commodity market.

 

In the earlier last week, crude oil price was traded flat near the level of $41.00 as investors were still awaiting for the crude oil inventories data to determine the short term direction of oil price. As of result, API institute reported an a huge draw in crude oil inventories of 6.829M, surprisingly lower than the economist forecast at -1.200M. Besides, Crude Oil Inventory from EIA also reduced significantly as of last week, where the actual reading of -10.612M is lower than the economist forecast at 0.357M. However, this surprise draw in crude oil inventories failed to lift up the appeal of this black commodity market as worries about slow demand growth prevailed. As of writing, the global virus cases have breached the level of 18 million while the death toll is getting closer to the level of 700k, fostered the doubt about the strength of the current economic recovery.  The increasing number of virus cases in countries such as India, Brazil and US continue faded the outlook of this oil product despite the development of vaccine has entered into third stage of trial.

 

Meanwhile, market participants will continue eye on further development of vaccine as well as inventory data to determine to direction of this commodity price.

 

Weekly Outlook:Aug 03 – Aug 07

For the week ahead, investors would have to scrutinize the latest developments with regards to the development of virus’s vaccine, tensions between U.S. and China and also crucial economic data such as NFP in order to gauge the direction of every each currency’s pair.

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: July 03 – 07

Time Market Event Actual Expectation Previous
Monday – 3rd August 2020
09:45 CNY Caixin Manufacturing PMI (Jul) 51.3 51.2
15:55 EUR German Manufacturing PMI (Jul) 50.0 45.2
16:30 GBP Manufacturing PMI (Jul) 53.6 50.1
22:00 USD ISM Manufacturing PMI (Jul) 53.6 52.6
Tuesday –4th August 2020
09:30 AUD Retail Sales (MoM) (Jun) 2.4% 16.9%
12:30 AUD RBA Interest Rate Decision (Aug) 0.25% 0.25%
12:30 AUD RBA State Statement
Wednesday – 5th August 2020
06:45 NZD Employment Change (QoQ) (Q2) -2.0% 0.7%
16:30 GBP Composite PMI (Jul) 57.1 47.7
16:30 GBP Services PMI (Jul) 56.6 47.1
20:15 USD                 ADP Nonfarm Employment Change (Jul) 1,500K 2,369K
22:00 USD ISM Non-Manufacturing PMI (Jul) 55.0 57.1
22:30 CrudeOIL Crude Oil Inventories 0.357M -10.612M
Thursday – 6th August 2020
14:00 GBP  BoE Inflation Report
14:00 GBP                 BoE Interest Rate Decision (Jul) 0.10% 0.10%
14:00 GBP BoE MPC Meeting Minutes
16:30 GBP Construction PMI (Jul) 57.0 55.3
20:30 USD Initial Jobless Claims 1,400K 1,434K
Friday – 7th August 2020
20:30 CNY                 Nonfarm Payrolls (Jul) 1,650K 4,800K
20:30 EUR Unemployment Rate (Jul) 10.5% 11.1%
20:30 CAD                 Employment Change (Jul) 415.0K 952.9K
22:00 CAD Ivey PMI (Jul)   58.2