6 July 2020 Weekly Analysis
GCMAsia Weekly Report: July 6 – July 10
Dollar index which gauge its value against a basket of six major currencies managed to recover part of its losses after hitting its lowest level in one month as it’s attraction as safe haven currency surged while the global infection heightened.
On earlier last week, dollar index jumped significantly amid positive data from US housing sector exerted huge bullish momentum in greenback market. According to the National Association of Realtors, US Pending Home Sales data came in at 44.3%, unexpectedly higher than the economist forecast of only 18.9%, indicating a strong revive in US housing sector after hitting tremendously by the virus in the past few months. Besides, other upbeat economic data such as CB Consumer Confidence for the month of June also lifted up the appeal of greenback earlier last week.
Unfortunately, dollar index failed to extend its gains when it came to later part of last week amid dovish statement from US Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell, with regards to the future of US economy. In both statements, they are agreed that an additional economic relief package should be implemented in the near future as US economy is still haunted by the fallout of pandemic. However, the stimulus plan is expected to be unveiled after getting the approval from lawmakers, most likely will be at the end of July. The US intention on unleashing additional relief program had triggered huge sell off pressure on dollar, urged investor fled into other currency market.
Nonetheless, dollar index ended the week at a higher level as NFP and Unemployment Rate data blew the estimation of economist forecast, came in at an upbeat outcome while showing a good sign of improvement in US labor market. Still, market are now continues paying their attention over the pandemic’s issue as it acts as an important catalyst that determine the direction of dollar market.
The pair of USD/JPY managed to extend its gains throughout the entire last week while ending the trading session at 107.50 amid a series of upbeat economic data from US. Despite, the gains of USD/JPY was limited as decision of stimulus package dragged down the appeal of US dollar. As of now, the direction of USD/JPY is still unclear as market will continue to eyes on the development of pandemic.
The pair of EUR/USD was remain traded in a consolidation pattern last week, while ending the trading session at the price of 1.1245. In the first half of last week, the pair of EUR/USD plunged significantly as the tensions between Europe and US heightened after EU announced to extend its visa ban against US travelers. Hence, it urged the investors to sell off their holdings of euro as market participants expect US will take revenge action against EU not too long after. However, a series of upbeat economic data from EU region which included CPI data, German Manufacturing PMI and German Unemployment Change delivered the upside of euro in the week.
The currency of pound sterling rallied against US dollar while ending the last trading session at the price of 1.2480. Throughout the past week, the pair of GBP/USD surged significantly as hopes over economy recovery increased which shown in a recent V-shaped economy condition. However, the deadlock of trade negotiation between EU and UK is still remained where both parties were unwilling to ‘step back’ in the negotiation of post-Brexit trading terms at all. Besides, UK Prime Minister Boris Johnson still insists to not extend the transition period of Brexit even no deal Brexit occurred. As of now, market will continues to pay their attention on more talks between this both parties.
Market Review (Commodities): June 29 – July 3
Gold price was hovered near the recent highs while ending the trading session at the price of $1775.00 a troy ounce amid mixed market sentiment. Earlier last week, bullish momentum was continue riding on the yellow metal as the pandemic exacerbated where the global virus cases spiked up significantly, displaying the sign of second wave. However, the gains of gold suppressed by the positive economic data from US. Optimistic prospect of US economy urged investors fled into riskier asset despite the virus appears to be spreading out of control.
Crude oil managed to hold its ground at high level as a series of positive data and news continue to contribute bullish momentum toward this black commodity market while ending the trading session at $40.40 per barrel.
On data front, the American Petroleum Institute (API) reported an oil inventory draw of 8.156 million barrels while the estimation of economist was around -2.700M. Besides, unexpected drop in inventories level has also shown in the EIA inventories level data. According to EIA, US Crude Oil inventories level came in at -7.195M against the market expectation of -0.710M. Both lower-than-expected inventories data indicated that supply glut eased where market demand increased after countries lifted the lockdown measure. Besides, Baker Hughes Oil Rig Count has also decreased from previous reading of 188 to 185, showing that the supply of crude oil dropped as drilling activity reduced last week. Additionally, recent news showed that Saudi Arabia had threatened Nigeria, Angola and Iraq with another oil price war if they did not abide to the oil cut plan.
Yet, market are now eyeing on the upcoming inventory data and more news regarding to OPEC members compliance. With no doubt, the development of pandemic will also act as the important catalyst that determine the further direction of crude oil in near future.
Weekly Outlook: July 6 – July 10
For the week ahead, investors would continue to eye on the U.S development and economic data such as Initial Jobless Claim and PPI to determine further direction. On top of that, as U.S continue to battle with coronavirus, market will also be paying attention to the latest updates about the coronavirus.
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 6 – July 10
|Monday – 6 July 2020|
|16:30||GBP||Construction PMI (Jun)||–||47.0||28.9|
|22:00||USD||ISM Non-Manufacturing PMI (Jun)||–||50.0||45.4|
|Tuesday – 7 July 2020|
|12:30||AUD||RBA Interest Rate Decision (Jun)||–||0.25%||0.25%|
|12:30||AUD||RBA Rate Statement||–||–||–|
|14:00||EUR||German Industrial Production (MoM) (May)||–||10.0%||-17.9%|
|22:00||USD||JOLTs Job Openings (May)||–||4.850M||5.046M|
|22:00||CAD||Ivey PMI (Jun)||–||–||39.1|
|Wednesday – 8 July 2020|
|04:30||CrudeOIL||API Weekly Crude Oil Stock||–||–||-8.156M|
|22:30||CrudeOIL||EIA Crude Oil Inventories||–||-0.710M||-7.195M|
|Thursday – 9 July 2020|
|20:30||USD||Initial Jobless Claims||–||1,378K||1,427K|
|Friday – 10 July 2020|
|16:00||CrudeOIL||IEA Monthly Report||–||–||–|
|20:30||USD||PPI (MoM) (Jun)||–||0.4%||0.4%|
|20:30||CAD||Employment Change (Jun)||–||800.0K||289.6K|