8 June 2020                 Weekly Analysis

GCMAsia Weekly Report: June 8 – 13

Market Review (Forex): June 1 – 6

US Dollar

The dollar index which traded against a basket of six major currency pairs extent its losses last week amid optimism that the worse of the economic recessions stemming by the global coronavirus pandemic is over, which stoked a shift in sentiment toward riskier asset while diminishing demand for the greenback. Nonetheless, the losses experienced by the Dollar index was limited over the backdrop of upbeat data from the United States. The dollar index was closing its price on last Friday session at the price of 96.90.

 

For last week, most of the economic data from United States region were dominated by positive data despite some of the data were worse better than expectation. According to Institute for Supply Management, the U.S. ISM Manufacturing Purchasing Managers Index (PMI) notched higher from the preliminary reading of 41.5 to 43.1, exceeding the market forecast at 43.0 while U.S. ISM Non-Manufacturing Purchasing Managers Index (PMI) increased from the previous reading of 41.8 to 45.4, which also better than the economist forecast at 45.4. Similarly, U.S. ADP Nonfarm Employment Change had massively increased from the previous reading of -19,557K to -2,760K, better than the market forecast at -9,000K, reported by the Automatic Data Processing (ADP) organization. Besides, the U.S. Nonfarm Payrolls and U.S. Unemployment rate were both came in better than market expectation, which dialed up the market optimism toward the economic progression in the United States. However, the U.S. Initial Jobless Claims came in at 1,877K, worse than the market forecast at 1,800K.

 

As for now, the market sentiment has now improved dramatically in the FX market amid investors are now focusing on the signs of a rebound from the coronavirus outbreak, which prompting the investors to selloff safe-haven asset while shifting their portfolio toward riskier currency such as Pound Sterling and Euro. The world equity market hit three-month high on last week as the monetary and fiscal economic stimulus had given investors’ confidence, despite there are still risk for a slow economic recovery, rising tensions between U.S.-China and also rising coronavirus infection. Most of the analysts predicted the US Dollar will extend its losses amid the hope upon the major central banks would continually buy government bonds and other financial assets to enhance the solvency and liquidity issues in the global financial system. Though, some may predict that there are still many uncertainties over the outlook, including diplomatic tension between the United States and China, and the U.S. presidential election later this year. Nonetheless, investors at this time would continue to scrutinize the latest updates with regards of the US-Sino trade war issues as well as the vaccine development for the coronavirus in order to receive further trading signal.

 

USD/JPY

Pair of USD/JPY was traded higher last week while ending last Friday session at the price of 109.84.  As for now, the Japanese Yen was traded lower amid the speculation on hopes of positive prospect for global economic recovery following few countries had reopened their economy, which prompting the investors to selloff significantly on the safe-haven Japanese Yen. Besides, the Japanese Yen received further bearish momentum over the backdrop of downbeat economic data from the Japan region. According to Cabinet Office, the Japanese Gross Domestic Product (GDP) for last quarter had came in at -0.6%, worse than the market forecast at -0.5%. Meanwhile, the Japanese Economic Minister Nishimura claimed that the Japan government would focus on containing coronavirus pandemic in order to boost back the economic growth.

 

EUR/USD

Pair of EUR/USD surged on last week while closing last Friday’s trading session with the price of 1.1292. The overall bullish momentum of the pair was mostly due to the weakening in the rival currencies, especially in US Dollar. Besides, the Euro received significantly bullish momentum following the European Central Bank increased stimulus in order to boost up the economic growth which hurt by the coronavirus pandemic. According to Reuters, the ECB increased the size of its Pandemic Emergency Purchase Program (PEPP) from 750 billion euro to 1.35 trillion euros, higher than the market expectation.

 

GBP/USD

The pair of GBP/USD surged on last week while closing its market at 1.2717. The overall bullish momentum for the pair was mainly due to the depreciation of the US Dollar. Besides, the Pound sterling received further bullish momentum following the Bank of England’s executive director for market claimed that a negative interest rate would not be introduced in near term. Nonetheless, the gains experienced by the Pound Sterling was limited following the European Union and British negotiators said there had been little progress in Brexit trade talks. At this time, investors would continue to focus on the Brexit development and also further economic data in order to gauge the likelihood movement for the currency.

 

Market Review (Commodities): June 1 – 6

GOLD

Gold price was traded lower in overall last week while closing its market on Friday at $1674.90 a troy ounce. The gold market slumped significantly over the surprisingly upbeat economic data from the United States region. According to Bureau of Labor Statistics, the U.S. Nonfarm Payrolls had massively increased from the previous reading of -20,687K to 2,509K, much better than the market forecast at -8,000K. Besides, the U.S. Unemployment Rate had notched down to 13.3% from the previous reading of 14.7%. Moreover, the global equity market had soared as investors remained optimism toward the global economic outlook following some major countries had decided to reopen their economic sectors, which weighed further on the safe-haven commodity.

 

CrudeOIL

The crude oil price surged on last week while closing last Friday session with $40.35 per barrels. The oil market was traded higher on last week following the OPEC and its allies including Russia agreed to extend record oil production cuts until the end of July. Besides, the group, known as OPEC+, also demanded countries such as Nigeria and Iraq, which exceeded production quotas in May and June, should compensate with extra cuts in July to September. With the inventory data front, according to Energy Information Administration (EIA), the U.S. Crude Oil inventories had declined massively from the previous reading of 7.928M to -2.077M, lower than the market forecast at 3.038M, which spurring further bullish momentum toward this black-commodity.

 

Weekly Outlook: June 8 – 13

For the week ahead, investors would have to scrutinize the latest developments with regards of the outbreak of the coronavirus, trade tensions between U.S. and China and also crucial economic data such as Federal Reserve Interest Rate Decision in order to receive further trading signals.

 

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: June 8 – 13

Time Market Event Actual Expectation Previous
Monday – 8th Jun 2020
07:50 JPY GDP (QoQ) (Q1) -0.5% -0.9%
Tuesday – 9th Jun 2020
22:00 USD JOLTs Job Openings (Apr) 5.750M 6.191M
Wednesday – 10th June 2020
04:30 USD API Weekly Crude Oil Stock -0.500M
20:30 USD Core CPI (MoM) (May) -0.1% -0.4%
22:30 USD Crude Oil Inventories 3.038M -2.077M
Thursday – 11st June 2020
02:00 USD FOMC Economic Projections
02:00 USD FOMC Statement
02:00 USD Fed Interest Rate Decision 0.25% 0.25%
02:00 USD FOMC Press Conference
20:30 USD Initial Jobless Claims 1,877K
20:30 USD PPI (MoM) (May) 0.1% -1.3%
Friday– 12nd June 2020
14:00 GBP GDP (MoM) -18.7% -5.8%
14:00 GBP Manufacturing Production (MoM) (Apr) -15.0% -4.6%
01:00

(13rd)

CrudeOIL US Baker Hughes Oil Rig Count 206