7 September 2020                 Weekly Analysis

 

GCMAsia Weekly Report: September 7 – 11

Market Review (Forex): August 31 – September 1

US Dollar

Dollar index which gauges its value against a basket of six major currencies have managed to rebound from its low while ending last week session at the price of 92.75. Despite with the mixed results from economic data in overall, the results were enough to support the greenback and prevent another slide.

 

On data front, The ISM Manufacturing PMI rose from 54.2 to 56.0 in August while the Non-Manufacturing PMI fell from 58.1 to 56.9. As the service sector remains key, the combined results were enough to provide relief for the markets. On top of the, the improving conditions in the job market also provide further comfort for the greenback. According to the U.S Department of Labor, the number of people filing for claims as represented by the Initial Jobless Claims data were eased to 881k, better than market expectation of 950K. Besides that, Challenger Job Cuts also improved by 115.762K, better than previous reading of 262.649K. Still, it all comes down to Friday’s Non-Farm Payroll. Following the data from US Bureau of Labor Statistics, the U.S have added  1371K jobs in August, slightly lesser than market expectation of 1400K. Despite that, the reading was also good enough to continue support the market as it was coupled with the improvement in U.S unemployment rate from 10.2% to 8.4%.

 

However, due to the increasing tension between U.S and China with addition to the coronavirus pandemic, market cautiousness and appetite for bearish bets remains high which limit the upside potential for the greenback. Following latest development, Secretary of State Mike Pompeo have announced that senior Chinese diplomats would need advance permission to visit U.S university campuses, meeting with local officials or organize any events that is larger than 50 people outside of embassy grounds. The move further worsen the relationship between U.S and China after U.S recently forced the closure of China consulate in Houston over espionage accusations. On coronavirus front, U.S have yet to recover from coronavirus as University of Washington health institute have projected on Friday that the U.S coronavirus death will reach 410K by the end of the year. On top of that, news of U.S refuse to join developing vaccine efforts that is related to WHO also diminishing the market sentiment last week.

 

Nonetheless, investors will now continue to focus on the latest updates on vaccines and further news on U.S-China relations to gauge the direction for the greenback. At the same time, market will also eye on the economy health which can be reflected by its economic data.

 

USD/JPY

The pair of USD/JPY have rose slightly throughout the week while ending last Friday session at the price of 106.05. As most economic data were skewed to the positive, the pair receive bullish momentum in overall. Industrial production jumped by 8% in July while retails sales also rose by 1%. Besides that, service sector activity also manage to avoid a higher contraction as the PMI fell slightly from 45.4 to 45.0.

 

EUR/USD

The pair of EUR/USD have fell on last week while closing last Friday’s trading session with the price of 1.1836. Last week, euro currency was largely sold in the market as relatively disappointing data and dovish commentary from ECB have led the pair to the downfall. German Manufacturing PMI fell from 53.0 to 52.2 while Eurozone CPI also dropped from 0.2% to -0.2%. German retail sales also fails to impress with the weaker than expected reading of -0.9% against the expectation of 0.5%. However, it was the dovish comment that was ultimately caused the Euro to drop sharply last week. ECB Chief Economist Philip Lane stated that the “the euro-dollar rate in 1.20 barrier does matter” which suggested that the central bank is uncomfortable with the currency recent appreciation.

 

GBP/USD

The pair of GBP/USD have fell in overall but manage to limit it lost during the end of the week while closing its market at 1.3080. On data front, the stats were mostly skewed to the negative. U.K Manufacturing PMI fell to 55.2 from 55.3. Besides that, composite PMI also fell to 59.1 from 60.3 while services PMI slipped to 58.8, missed market expectation of 60.1. On the monetary policy front, the outlook was also gloomy. BoE expected the economy to see a more material contraction than forecasted back in June.

 

Market Review (Commodities): August 31 – September 1

GOLD

Gold price continue to struggle on regain control and fell throughout the week while closing its market on Friday at $1933.48 per troy ounce. Overall, the demand for the safe-haven commodity is fading as the recovering strength in the greenback have urged investors to favor the U.S dollar. On top of that, surging U.S bond yields and positive U.S equity futures also added into the selling pressure which further drive demand away from the non-yielding yellow metal.

 

CrudeOIL

The crude oil price have plunged last week while closing last Friday session with $39.46 per barrel following market anxiety over the demand continue to weigh on the black commodity.

 

Despite with falling crude oil inventories reported by API and EIA, the positive data unable to convince buying demand due to weakening demand. Last week, data from Refinitive Eikon suggested that the volume of crude arriving in China, the world’s largest crude importer, is set to slow in September. At the same time, Figures from Pay with GasBuddy data also showed that the demand for fuel have already peaked at the second of August and has declined every week since then. By the second half of the week, Bakers Hughes also reported that the number of oil rigs in the U.S have rose by 1 to 181 due to price plunge.  OPEC and its allies including Russia also reduce their production cuts to 7.7 million barrels per day also provided further reason for investors to sell the commodity.

 

Meanwhile, market participants will continue eye on inventory data to gauge the supply level as well further development on China and potential coronavirus vaccine which may further determine the direction for the commodity.

 

Weekly Outlook: September 07 – 11

For the week ahead, investors would continue to the latest developments with regards to the development of coronavirus, tensions between U.S. and China and also crucial inflation such as CPI 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: September 07 – 11

Time Market Event Actual Expectation Previous
Monday – 3rd August 2020
N/A
Tuesday –4th August 2020
07:50 JPY GDP (QoQ) (Q2) -8.1% -0.6%
Wednesday – 5th August 2020
20:00 CrudeOIL EIA Short-Term Energy Outlook
22:00 USD JOLTs Job Openings (Jul) 6.000M 5.889M
22:00 CAD BoC Interest Rate Decision 0.25% 0.25%
Thursday – 6th August 2020
04:30 CrudeOIL API Weekly Crude Oil Stock -6.36M
19:45 EUR ECB Interest Rate Decision (Sep) 0.00% 0.00%
19:45 EUR ECB Monetary Policy Statement (Sep)
20:30 USD Initial Jobless Claims 838K 881K
20:30 USD PPI (MoM) (Aug) 0.2% 0.6%
20:30 EUR ECB Press Conference
23:00 CrudeOIL EIA Crude Oil Inventories -1.887M -9.362M
Friday – 7th August 2020
14:00 GBP GDP (YoY) -21.7% -1.7%
14:00 GBP Manufacturing Production (MoM) (Jul) 5.0% 11.0%
20:30 USD Core CPI (MoM) (Aug) 0.2% 0.6%