07 December 2020 Weekly Analysis
GCMAsia Weekly Report: December 7 – 11
Market Review (Forex): November 30 – December 4
US Dollar
The dollar index which traded against a basket of six major currency pairs continue to remain in red for the third consecutive week and fell throughout the previous week while ending last week session with the price of 90.74. Besides with the ongoing vaccine development that continue to drive riskier market, the greenback also getting further disappointment from weak data.
From data perspective, the overall data provided a mixed reading with most of the stats were skewed to the negative. Manufacturing sector growth slowed in November. Service sector growth also slowed in November with the ISM Services PMI falling from 56.6 to 55.9. More important, the all-important non-farm payroll data have triggered more disappointing with the reading of only 245k, missing market expectation of 469K. However, the market also getting some relief from some positive data. Initial jobless claims have eased back from 778k to 712k in the week ending 27th November and unemployment rate also improved to 6.7%, beating market expectation of 6.8%. Data aside, the ongoing positive development of vaccine also continue to improve investor’s confidence towards riskier assets, thus pressuring the greenback as a safe-haven currency.
With the ongoing vaccine development and increasing expectation of global economy recover to pre-COVID 19 levels, the strength of the greenback is expected to fade further while market continue to focus on more catalyst to attain further confirmation for the greenback.
USD/JPY
The pair of USD/JPY was traded steady throughout the week but still ending the week with a loss while closing at the price of 104.16. On data front, Japan’s retail sales unexpectedly improved by 6.4%, surpassed market expectation of -7.7. Industrial production also continued to rise, reflecting a pickup in demand at the turn of the quarter. On top of that, service and manufacturing sector also improved. Manufacturing PMI came in at 49.0 while Services PMI came in at 47.8, both higher than expectation of 48.3 and 46.7 respectively. Despite that, improved market risk appetite remains weighing on the Yen with COVID-19 vaccine news supporting riskier assets.
EUR/USD
Pair of EUR/USD have rallied throughout the entire week while closing the market with the price of 1.2119. Despite with disappointing data, the Euro experience huge demand as the progress of COVID-19 and weakening dollar help muted the effect of the weak data. On data front, Eurozone Composite PMI fell from 50.0 to 45.3 in November. Eurozone CPI also deteriorates further to -0.3%, missing further expectation of -0.2%. In Germany, German Manufacturing PMI for November fell to 57.8 against market expectation of 57.9. Some of other stats such as German retail sales and unemployment data improved.
GBP/USD
The pair of GBP/USD have continued to extend its gains in the week while ending last Friday session at the price of 1.3431. Besides with positive stats, hopes of Brexit agreement also continue to support the pair’s rally. On data front, U.K Manufacturing PMI rose to 55.6 while Services PMI also improved to 47.6, both exceed market expectation of 55.2 and 45.8 respectively. While most of the market participants remain optimistic on Brexit deal, the uncertainty at the near end of the week have prevented a potential breakout for the pair while market waits for more news to determine further direction.
Market Review (Commodities): November 30 – December 4
GOLD
Gold price have managed to reverse most of its previous losses and ending the market with their best week at the price 1838.53 a troy ounce. Despite the continued emphasis on risk, gold as a safe-haven commodity have emerged from one of its brutal sell-offs previously due to talk of a new U.S. Covid-19 stimulus effort which also triggered a plunge in the dollar. In the past few month, both sides continue to remain tough on their terms. However, the stalemate was finally broken last week after a bipartisan group of Democrats and Republicans proposed a $908 billion relief bill, which the two sides have been negotiating since.
CrudeOIL
The price of crude oil has advanced throughout the week while closing last Friday session with the price of $46.05 per barrel. The ongoing optimism on vaccine development and OPEC decision becomes the major driver for the black commodity.
On data front, the Energy Information Administration (EIA) on Wednesday reported an oil inventory draw of -0.679 million barrels, lesser than market expectation of a 2.358 million decrease. Despite that, investors continue to cheer on the improving outlook of future oil demand due to good news on Pfizer, Moderna and AstraZeneca vaccines. On top of that, the market also taking more hint from OPEC’s admirable discipline with production. Last week, OPEC+ agreed at Thursday’s ministerial meeting to ease production cuts by 500,000 barrels per day (bpd) from January 2021. The increase sees OPEC+ production reduced to 7.2 million bpd, or 7% of global demand, from January onwards, compared to the current 7.7 million bpd cuts. On top of that, signs of progress on latest U.S stimulus measure last week also provide extra boost for the black commodity.
With the prospect for the commodity continue to improve, the commodity is expected to experience huge volatility ahead while investors remain focus on any catalyst that could affect the outlook for the demand and supply which could also change the course of direction for the crude oil.
Weekly Outlook: December 7 – 11
For the week ahead, investors would continue to focus on the developments on U.S stimulus, vaccine and economic data such as CPI and PPI to determine further direction.
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: December 7 – 11
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 7hb December 2020 | |||||
| 23:00 | CAD | Ivey PMI (Nov) | – | 51.5 | 54.5 |
| Tuesday – 8hb December 2020 | |||||
| 07:50 | JPY | GDP (QoQ) (Q3) | – | 5.0% | -7.9% |
| 18:00 | EUR | German ZEW Economic Sentiment (Dec) | – | 46.0 | 39.0 |
| 20:00 | USD | EIA Short-Term Energy Outlook | – | – | – |
| Wednesday – 9hb December 2020 | |||||
| 23:00 | USD | JOLTs Job Openings (Oct) | – | – | 6.436M |
| 23:00 | CAD | BoC Interest Rate Decision | – | 0.25% | 0.25% |
| 23:30 | USD | Crude Oil Inventories | – | -2.358M | -0.679M |
| Thursday – 10hb December 2020 | |||||
| 15:00 | GBP | GDP (MoM) | – | – | 1.1% |
| 17:30 | GBP | Manufacturing Production (MoM) (Oct) | – | 0.2% | 0.2% |
| 20:45 | EUR | ECB Monetary Policy Statement | – | – | – |
| 20:45 | EUR | ECB Interest Rate Decision (Dec) | – | – | 0.00% |
| 21:30 | USD | Core CPI (MoM) (Nov) | – | 0.1% | 0.2% |
| 21:30 | USD | Initial Jobless Claims | – | 725K | 712K |
| 21:30 | USD | ECB Press Conference | – | – | – |
| Friday – 11hb December 2020 | |||||
| 21:30 | USD | PPI (MoM) (Nov) | – | 0.2% | 0.3% |