9 March 2020 Weekly Analysis
GCMAsia Weekly Report: March 9 – 13
Market Review (Forex): March 2 – 6
US Dollar
US dollar extended its losses throughout last week following rapid spread of coronavirus outside of China as well as higher expectation towards further interest rate cut from the Federal Reserve. The dollar index closed last Friday’s trading at around 95.99 against a basket of six major currencies.
Investor’s initiated to selloff their holdings of equities and assets in the United States after US Centers for Disease Control and Prevention warned that the coronavirus may have spread in the United States. As of today, United States has reported 547 new infections and 22 deaths. Market participants fear that a rapid spread of coronavirus in the US may jeopardize its economic momentum as majority of its economy depends on consumer spending and services revenue.
On Wednesday, US dollar tumbles further downwards after Federal Reserve announced a surprise rate cut in order to negate possible economic impact from coronavirus. According to Reuters, Fed announced to lower its target interest rate by 50 basis points to a target range of 1.00% – 1.25%. In the press conference, Fed Chair Jerome Powell reiterates that the US economy remains resilient while he acknowledges the possible spread of coronavirus may jeopardize its current economic outlook.
Although latest Nonfarm Payrolls report came in higher than expected, investors remains pessimistic upon US dollar as Fed signals for further rate cuts in the near future. In the Beige Book released on last Wednesday, Federal Reserve noted that the spread of coronavirus may bring in significant negative impact upon US economy, with large indication that it may severely impact travel and tourism in the US. In addition, the Beige Book has mentioned coronavirus for more than 48 times, indicating its high priority in Federal Reserve while raising more prospect for another rate cut later this month.
USD/JPY
Pair of USD/JPY extended its losses while closing last week’s market at 105.36. Japanese yen received higher demand in the FX market as investors continues to selloff their holdings in equity such as shares. Rapidly spreading of coronavirus outside of China especially in the US and EU has dialed up concerns over global economic recession. For the time being, investors will continue to monitor its latest updates in order to gain more market signals.
EUR/USD
Pair of EUR/USD extended its gains, closing last week’s market at around 1.1285. Euro continues to gains its bullish traction as the appeal for US dollar continues to diminish over higher expectation for more rate cuts from the region. Nonetheless, gains on the euro were limited as coronavirus continues to spread in Italy. Last weekend, Italy’s Prime Minister Giuseppe Conte announced to severely limits transportation in the region of Lombardy which includes Milan in order to curb the spread of coronavirus. For the time being, coronavirus cases have reached near 6,000 while death toll rises to 223.
GBP/USD
Pair of GBP/USD advanced further upwards, closing last week’s market at 1.3046. Pound sterling received higher demand in the FX market as US dollar experienced significant selloff due to higher expectation for a rate cut in the near future. However, gains on pound sterling remains limited as trade negotiation in between EU and UK poses significant risk if both parties fail to achieve an agreement.
Market Review (Commodities): March 2 – 6
GOLD
Gold price rose sharply last week while closing last week’s market at around $1,673.48 a troy ounce. Safe-haven assets received higher demand for the past few weeks as coronavirus began to spread outside of China. Both US and EU have recorded significant rise in number of cases and death tolls, raising expectation for possible negative impact over its economic momentum. For the time being, investors will continue to scrutinize updates with regards to coronavirus in order to attain more market signals.
Crude Oil
Crude oil price slumped more than 30% as the market reopens this Monday following a fallout of negotiation in between OPEC+ and Russia. Prior, OPEC+ has proposed to reduce its production further by 1.5 million barrels per day in order to mitigate negative impact of coronavirus upon global oil demand.
However, Russia rejected the proposal, stating that they are currently satisfied with its current pricing while reiterates that their country would be able sustain any further depreciation in crude oil price. The meeting in between OPEC+ and Russia also concluded without any new directive with regards to the current production cut that is set to expire by the end of March.
Following the rejection from Russia, Saudi Arabia is currently planning to boost its crude oil output above 10 million barrels per day in an attempt to retaliate Russia’s rejection as well as to garner more market shares. Last Saturday, Saudi Arabia also announced massive discounts to its official selling price for the month of April, sparking concerns over an oil price war.
According to economists, both Saudi Arabia and Russia are currently entering into an oil price war which is likely to be limited and tactical. The outcome of such crisis may last for several weeks to months until the price is low enough in order to form a compromise in between both countries.
Weekly Outlook: March 9 – 13
For the week ahead, investors will place their attention upon major data releases from US, UK and EU in order to attain more market signals.
For the oil market, traders will place their attention upon weekly inventory reports from American Petroleum Institute (API) and Energy Information Administration (EIA) for more signals.
Highlighted economy data and events for the week: March 9 – 13
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 9 Mac 2020 | |||||
| 08.00 | JPY | GDP (QoQ) (Q4) | – | -1.7% | -1.6% |
| Tuesday – 10 Mac 2020 | |||||
| 09.30 | CNY | CPI (MoM) (Feb) | – | 0.8% | 1.4% |
| Wednesday – 11 Mac 2020 | |||||
| 17.30 | GBP | GDP (MoM) | – | 0.2% | 0.3% |
| 17.30 | GBP | Manufacturing Production (MoM) (Jan) | – | 0.5% | 0.3% |
| Tentative | GBP | Autumn Budget | – | – | – |
| 20.30 | USD | Core CPI (MoM) (Feb) | – | 0.2% | 0.2% |
| 20.30 | CrudeOIL | Crude Oil Inventories | – | – | 0.785M |
| Thursday –12 Mac 2020 | |||||
| 20.30 | USD | PPI (MoM) (Feb) | – | -0.1% | 0.5% |
| 20.45 | EUR | Deposit Facility Rate (Mar) | – | -0.50% | -0.50% |
| 20.45 | EUR | ECB Marginal Lending Facility | – | 0.25% | 0.25% |
| 20.45 | EUR | ECB Monetary Policy Statement | – | – | – |
| 20.45 | EUR | ECB Interest Rate Decision (Mar) | – | 0.00% | 0.00% |
| 21.30 | EUR | ECB Press Conference | – | – | – |
| Friday – 13 Mac 2020 | |||||
| 22.00 | USD | Michigan Consumer Sentiment (Mar) | – | 95.0 | 101.0 |