8 February 2021 Weekly Analysis
GCMAsia Weekly Report: February 8 – 12
Market Review (Forex): February 1 – 5
US Dollar
The dollar index which traded against a basket of six major currency pairs posted its best weekly gain in three months on last week over the backdrop of a string of upbeat economic data as well as the resolution of the Covid-19 pandemic which dialed up the market optimism toward the economic progression in the United States. The Dollar Index was closing its price on last Friday session at the price of 90.20.
On the economic data front, most of the crucial economic data for last week were dominated by upbeat reading, despite some of the results fared worse than economic expectation. On the positive note, the Institute for Supply Management reported that the U.S. Non-ISM Manufacturing Purchasing Managers Index (PMI) had notched up significantly from the previous reading of 57.7 to 58.7, exceeding the market forecast at 56.8. Meanwhile, the U.S. ADP Nonfarm Employment Change and Initial Jobless Claims came in at 174K and 779K, which also fared better than the market expectation at 49K and 830K respectively. The US economy condition had started to improve significantly after falling into severe contraction stage, which seemingly due to the rollout of vaccine program last month. As for now, the US new Covid-19 daily cases had drop below 100,000, which spurring positive prospect over the effectiveness of Covid-19 vaccine rollout.
Nonetheless, the gains experienced by the US Dollar was limited over the backdrop of huge economic stimulus expectation from US government. According to Financial Times, the US President Joe Biden defended his plans for a $1.9tn fiscal stimulus package after the Nonfarm payrolls data had showed bearish reading. The weakness of the US jobs market has been one of the main catalysts for Biden’s drive to enact a $1.9tn economic stimulus plan. Meanwhile, aggressive economic stimulus plan would be increasing the money supply in circulation, which spurring further bearish momentum for the US Dollar, Despite that, investors would continue to scrutinize the latest updates with regards of the US economic stimulus plan, Covid-19 development as well as the latest crucial economic data in order to gauge the likelihood movement for the index.
USD/JPY
The pair of USD/JPY received bullish momentum on last week while ending last Friday session at the price of 105.75. The overall bullish momentum for the pair was mainly due to the appreciation of the US Dollar. Besides, the positive development with regards of the Covid-19 vaccines had also dragged down the appeal of the safe-haven Japanese Yen. According to CNBC, a coronavirus vaccine which developed by Pfizer and BioNTech appears to be effective against a key mutation in the more infection’s variants of the Covid-19 discovered in the U.K. and South Africa. Besides, the Covid-19 cases around the world have shown downward sloping curve, which spurring positive hopes upon the resolution of Covid-19 pandemic.
EUR/USD
The pair of EUR/USD slumped throughout the week while ending last week session at the price of 1.2280. The overall bearish momentum for the pair of EUR/USD was mainly due to appreciation of the US Dollar. Nonetheless, the losses experienced by the Euro was limited over the backdrop of hawkish statement from the European Central Bank. According to Reuters, the European Central Bank (ECB) had claimed that the unemployment rate in the euro region had started to decline. Short-term labor market indicators have also continued to improve while there will be a strong growth in the outcoming quarters, which driven by dynamic growth in machinery and equipment and corporate investment. Though, the second save of pandemic remained as a major concern for investors.
GBP/USD
The pair of GBP/USD was edged higher on last week while closing its market price at 1.3715. Pound Sterling surged significantly following Bank of England (BoE) left it monetary policy unchanged while putting off the possibility to negative interest rate in anytime soon. Besides, BoE also revealed their forecast where expecting UK economy will recover rapidly amid the ongoing vaccination program is assumed to lead to an easing of national lockdown as well as public health concern. Last but not least, BoE had maintained its asset-purchase plan at 895 billion pounds ($1.2 trillion). In overall, hawkish signal from BoE had spurring significant demand on the Pound Sterling.
Market Review (Commodities): February 1 – 5
GOLD
Gold price slumped tremendously throughout last week with the price of $1814.00 troy ouns amid the positive development over the Covid-19 pandemic. According to CNBC, the global Covid-19 cases are on the decline following Covid-19 vaccine had started to rollout. There were 3.7 million new global Covid-19 cases reported during the week ending 31st January, which marked a 13% decrease compare with the week prior, according to a new WHO report. Nonetheless, the losses experienced by the safe-haven commodity was limited over the backdrop of bearish NFP data from the US region last week. According to Bureau of Labor Statistics, the U.S. Nonfarm Payrolls came in at only 49K, worse than the market forecast at 50K. On the other hand, positive progress in US stimulus plan has also sparked another round of demand in the gold market. Last Friday, US Senate passes a budget resolution as Democrats move forward with the process to pass a $1.9 trillion Covid-19 relief bill without Republican votes. Aggressive economic stimulus plan would be increasing the money supply in circulation, which spurring inflation risk in future while insinuating market demand on the safe-haven gold.
CrudeOIL
The price of crude oil surged throughout the week while closing last Friday session with the price of $57.50 per barrel amid the positive Covid-19 vaccine development had spurred market optimism toward the crude oil demand in future. Besides, the crude oil price extends its gains over the backdrop of upbeat inventory data from EIA last week. According to Energy Information Administration (EIA), the U.S Crude Oil inventories came in at -4.261M, much lesser than the market forecast at 0.367K, which dialed up the market optimism toward the demand on this black commodity.
Weekly Outlook: February 8 – 12
For the week ahead, investors would continue to focus on crucial economic data such as Initial Jobless Claims from the region of U.S and also Covid-19 development in order 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: February 8 – 12
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 8th February 2021 | |||||
| N/A | |||||
| Tuesday – 9th February 2021 | |||||
| 20:00 | CrudeOIL | EIA Short-Term Energy Outlook | – | – | – |
| 23:00 | USD | JOLTs Job Openings (Dec) | – | 6.400M | 6.527M |
| Wednesday – 10th February 2021 | |||||
| 21:30 | USD | Core CPI (MoM) (Jan) | – | 0.2% | 0.1% |
| 23:30 | CrudeOIL | Crude Oil Inventories | – | – | -0.994M |
| Thursday – 11st February 2021 | |||||
| 01:30 | USD | US Federal Budget | – | – | – |
| 21:30 | USD | Initial Jobless Claims | – | 750K | 779K |
| Friday – 12nd February 2021 | |||||
| 00:00 | USD | Fed Monetary Policy Report | – | – | – |
| 15:00 | GBP | GBP (QoQ) (Q4) | – | 0.5% | 16.0% |
| 15:00 | GBP | Manufacturing Production (MoM) (Dec) | – | 0.7% | 0.7% |