10 May 2020 Weekly Analysis
GCMAsia Weekly Report: May 10 – 14
Market Review (Forex): May 3 – 8
US Dollar
The dollar index which traded against a basket of six major currency pairs slumped significantly last week over the backdrop of string of downbeat economic data from Unites States region, which dialed down the market optimism toward the economic progression in United States while spurring bearish momentum on the US Dollar. The Dollar Index was closing its price on last Friday session at the price of 90.10.
For last week, most of the employment data were dominated by dismal data, despite some of the results were fared better than the market expectations. The outbreak of the coronavirus had tremendously destroyed the U.S. economy while millions of Americans are expected to lose their jobs due to the pandemic crisis. According to Bureau of Labor Statistics, US Nonfarm Payrolls had notched down significantly from the preliminary reading of 770K to 266K, worse than the market forecast at 978K. Meanwhile, US Unemployment Rate increased from previous reading of 6.0% to 6.1%, which also worse than the market forecast at 5.8%. As both crucial economic data fared worse-than-expectation, which spurring negative sentiment toward the economic progression in United States.
In fact, these downbeat data would be spurring expectation toward the Federal Reserve that they will continue to implement expansionary monetary policy in order to boost back the economic momentum, which trigger inflation risk in United States in future. Previously, the US Central bank pledged that they would continue to maintain its Quantitative Easing program until “further substantial” process is achieved on employment and inflation rate. The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the long-term basis. With huge aid plan outlook, dollar index market remained bearish as huge amount of dollars are expecting to be injected into the market, which might be diminishing the appeal of US dollar.
USD/JPY
Pair of USD/JPY was traded lower last week while ending last Friday session at the price of 108.35. The overall bearish momentum for the pair was mostly prompting by the weakening in US Dollar. Besides, spiking numbers of the Covid-19 cases in India had also spurred risk-off sentiment in the global financial market, which urging investors to rather hold safe-haven asset such as Japanese Yen.
EUR/USD
Pair of EUR/USD surged on last week while closing last Friday’s trading session with the price of 1.2165. 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 further bullish momentum amid the accelerating vaccination rates open up the prospect of easing lockdowns and reviving economies. According to Reuters, Germany and Italy administered a record number of Covid-19 vaccination shots. Besides, the vaccine production capacity had doubled every month since January in European region, while the EU Commissioner Thierry Breton claimed that the EU would have enough vaccine doses to completely immunize 70% of adults by mid-July.
GBP/USD
The pair of GBP/USD surged on last week while closing its market at 1.4025. The main contribution of bullish momentum on this currency pair were totally from the weakening of US Dollar. Nonetheless, the gains experienced by the GBP/USD was limited amid the concerns of dovish strategy from the Bank of England, which diminishing the appeal of the Pound Sterling. Last week, the Bank of England had maintained its interest rates at 0.10%, while setting the UK’s inflation target at 2% in order to sustain economic growth as well as employment rate. Besides, the Bank of England also increased its inflation target, forecasting the consumer price index would temporarily spike up above its 2% target toward the year-end. Similar to Federal Reserve, BoE speculated that the pace of inflation will run out of steam in future. Nonetheless, investors would continue to scrutinize the latest updates with regards of BoE statement as well as crucial economic data from UK region in order to gauge the likelihood movement for the Pound Sterling.
Market Review (Commodities): May 3 – 8
GOLD
Gold price spiked up significantly on last week while closing its market on Friday at $1840.05 per troy ounce as the risk-off sentiment in the FX market following the downbeat crucial economic data were released from the U.S. region. Market participants speculated that the Federal Reserve would more likely to implement Quantitative Easing program in long-term basis while injecting significant amount of US Dollar into the financial market in order to enhance the economic outlook in the United States. Indeed, such aggressive monetary stimulus plan would be spurring the high inflation risk in future, which prompting investors to shift their portfolio toward the safe-haven gold in order to hedge against the inflation risk. As for now, investors would continue to scrutinize the latest updates with regards of the economic data as well as the Covid-19 development in order to receive further trading signal.
CrudeOIL
The crude oil price received bullish momentum on last week while closing last Friday session with $65.55 per barrel. The oil market was traded higher over the backdrop of positive crude oil inventory data, which spurring positive prospect for the oil demand. According to American Petroleum Institute, the US API Weekly Crude Oil Stock notched down significantly from the previous reading of 4.319M to -7.688M, better than the market forecast at -2.191M. Besides, the Energy Information Administration (EIA) reported that the US Crude oil inventory came in at -7.990M, which also less than the market forecast at -2.346M.
Weekly Outlook: May 10 – 14
For the week ahead, investors would have to scrutinize the latest developments with regards of the outbreak of the coronavirus, economic stimulus from the global central bank, and crucial data such as UK GDP data 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. Besides that, investors would also focus on the meeting between OPEC+ and Russia which scheduled on this Thursday to gauge the likelihood movement for the oil commodity.
Highlighted economy data and events for the week: May 10 – 14
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 10th May 2021 | |||||
| N/A | |||||
| Tuesday – 11th May 2021 | |||||
| 15:00 | EUR | German ZEW Economic Sentiment (May) | – | 71.0 | 70.7 |
| 20:00 | CrudeOIL | EIA Short-Term Energy Outlook | – | – | – |
| 22:00 | USD | JOLTs Job Openings (Mar) | – | 7.500M | 7.367M |
| 22:30 | GBP | BoE Gov Bailey Speaks | – | – | – |
| Wednesday – 12nd May 2021 | |||||
| 14:00 | GBP | GDP (QoQ) (Q1) | – | -1.7% | 1.3% |
| 14:00 | GBP | Manufacturing Production (MoM) (Mar) | – | 1.0% | 1.3% |
| 17:00 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 20:30 | USD | Core CPI (MoM) (Apr) | – | 0.3% | 0.3% |
| 22:30 | CrudeOIL | Crude Oil Inventories | – | -2.346M | -7.990M |
| Thursday – 13rd May 2021 | |||||
| 20:30 | USD | Initial Jobless Claims | – | 500K | 498K |
| 20:30 | USD | PPI (MoM) (Apr) | – | 0.3% | 1.0% |
| Friday – 14th May 2021 | |||||
| 00:00 | GBP | BoE Gov Bailey Speaks | – | – | – |
| 19:30 | EUR | ECB Monetary Policy Statement | – | – | – |
| 20:30 | USD | Core Retail Sales (MoM) (Apr) | – | 0.9% | 8.4% |
| 20:30 | USD | Retail Sales (MoM) (Apr) | – | 0.2% | 9.7% |