10 August 2020                      Weekly Analysis

GCMAsia Weekly Report: August 10 – 14

Market Review (Forex): August 3 – 8

US Dollar

The dollar index which traded against a basket of six major currency pairs slumped last week amid the resurgence of the coronavirus infections from the U.S. region, a stalled coronavirus relief bill and escalating trade tensions between U.S. and China continue to hobble a nascent recovery in the U.S. economy, which spurring significant selloff for the US Dollar. The Dollar Index was closing its price on last Friday session at the price of 93.33.

 

In the latest sign of escalating trade tensions between the U.S. and China, the U.S. President Donald Trump issued an executive order Thursday to restrict the activities of Chinese social-media apps such as TikTok and WeChat. TikTok is the first Chinese technology platform to gain massive popularity in the U.S. while WeChat is the unrivaled superapp that has become pivotal to daily life in China, widely used by Americans who have business or personal connections there.  Besides, the spiking numbers of the coronavirus from the United States after several economic sector re-opening had prompted investors to doubt toward the efficiency of the economic recovery from the United States. According to theGuardian, the U.S. Coronavirus infections had passed 5 million cases while the U.S. has the highest number of deaths in the world form the coronavirus, at nearly 163,000.

 

However, the losses experienced by the US Dollar was limited over the backdrop of the string of positive economic data from the United States. According to Institute for Supply Management, the U.S. ISM Manufacturing Purchasing Manager Index and U.S. ISM Non-Manufacturing Purchasing Managers Index (PMI) came in at 54.2 and 58.1, which both better than the economist forecast at 53.6 and 55.0 respectively. Similarly, the Department of Labor reported that for last week the U.S. Initial Jobless Claims had notched down from the previous reading of 1,435K to 1,186K, confounding market forecast for a reading of up to 1,415K. In fact, the U.S. Nonfarm Payrolls and the U.S. Unemployment Rate had unexpectedly come in much better than expectation, dialed up the market optimism toward the economic progression in the United States while sparkling few demands for the US Dollar. Nonetheless, at this time investors would scrutinize the latest updates with regards of the U.S. latest economic stimulus plan, economic data as well as the coronavirus development in order to gauge the likelihood movement for the pair.

 

USD/JPY

Pair of USD/JPY was traded higher last week while ending last Friday session at the price of 105.90. The Japanese Yen received significantly bearish momentum following the coronavirus infections from the Japan region had spiked up to the record high on last week. According to Kyodo News, the Japan confirmed a record 1,597 new coronavirus infections on last Friday. To mitigate the risk of the virus spreading, Tokyo Gov. Yuriko Koike has requested residents to refrain from traveling during the holiday while the metropolitan government has raised its alert for the pandemic to the highest of four levels. Such sentiment had diminished the investors confident toward the economic progression in the Japan, which spurring selloff for the Japanese Yen.

 

EUR/USD

Pair of EUR/USD surged on last week while closing last Friday’s trading session with the price of 1.1774. The overall bullish momentum of the pair was mostly due to the weakening in the rival currencies, especially in US Dollar. Besides, the Euro extend its gains following a string of positive economic data from the Europe region were released. According to Markit Economics, the Germany Manufacturing Purchasing Managers Index (PMI) had notched up from the previous reding of 45.2 to 51.0, exceeding the economist forecast at 50.0. Similarly, the Eurozone Markit Composite Purchasing Managers Index (PMI) had also came in at 54.9, which also better than the market expectation at 54.8.

 

GBP/USD

The pair of GBP/USD surged on last week while closing its market at 1.3050. The overall bullish momentum for the pair was mainly due to the depreciation of the US Dollar. In fact, the Pound Sterling extend its gains following the Bank of England had provide hawkish tone toward the economic progression in the United Kingdom.  On last week, the Bank of England’s Monetary Policy Committee (MPC) voted unanimously to maintain the interest rate at 0.1% while reiterated that they will continue with existing economic stimulus programs to sustain the liquidity and solvency ration in the financial market. In fact, they also reiterated that the negative impact of the coronavirus toward the economic growth had dissipate gradually over the forecast period. Such hawkish statement had boosted up the market demand toward the Pound Sterling.

 

Market Review (Commodities): August 3 – 8

GOLD

Gold price was traded higher in overall last week while closing its market on Friday at $2034.58 per troy ounce. The gold market hit an all-time high on last week amid the worsening relationship between the both largest economic U.S. and China, which boosting the appeal of the save-haven commodities. Besides that, the unstoppable accelerating number of the coronavirus had also stoked a shift in sentiment toward the safe-haven asset, which sparkling further demand for the safe-haven gold. Nonetheless, the gains experienced by the gold price was limited following the United Stated released the better-than-expected economic data on last week. According to Bureau of Labor Statistics, the U.S. Unemployment rate had massively declined from the previous reading of 11.1% to 10.2%, better than the market forecast at 10.5%. In fact, the U.S. Nonfarm Payrolls came in at 1,763K, exceeding the market forecast at 1,600K.

 

CrudeOIL

The crude oil price surged on last week while closing last Friday session with $41.27 per barrels. The oil market was traded higher over the backdrop of the positive inventory data on last week. According to American Petroleum Institute, the U.S. API Weekly Crude Oil Stock declined massively from the previous reading of -6.829M to -8.587M, better than the market forecast at -3.300M. Besides the U.S. Crude Oil Inventories came in at -7.373M, lower than the economist forecast at -3.001M. As both data fared better than expectation, which indicating that the demand for the crude oil remained high, which providing the bullish momentum for this black-commodity. However, the gains experienced by the crude oil was limited amid investors’ fears the increasing number of the coronavirus had prompted investors to doubt against oil demand recovery in future. Nonetheless, investors at this time would continue to scrutinize the latest updates with regards of the coronavirus vaccine development and also oil inventory data in order to receive further trading signal for this commodity.

 

Weekly Outlook: Aug 10 – 14

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 UK GDP 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: August 10 – 14

Time Market Event Actual Forecast Previous
Monday – 10th August 2020
22:00 USD JOLTs Job Openings (Jun) 5.397M
Tuesday –11st August 2020
16:30 GBP Average Earnings Index +Bonus (Jun) -1.2% -0.3%
16:30 GBP Claimant Count Change (Jul) 250.0K -28.1K
17:00 EUR German ZEW Economic Sentiment (Aug) 58.0 59.3
20:00 CrudeOIL EIA Short-Term Energy Outlook
20:30 USD PPI (MoM) (Jul) 0.3% -0.2%
Wednesday – 12nd August 2020
04:30 CrudeOIL API Weekly Crude Oil Stock -8.587M
10:00 NZD RBNZ Interest Rate Decision 0.25% 0.25%
11:00 NZD RBNZ Press Conference
14:00 GBP GDP (QoQ) (Q2) -20.9% -2.2%
14:00 GBP Manufacturing Production (MoM) (Jun) 10.0% 8.4%
20:30 USD Core CPI (MoM) (Jul) 0.2% 0.2%
22:30 CrudeOIL                 Crude Oil Inventories -7.373M
Thursday – 13rd August 2020
08:30 AUD Employment Change (Jul) 40.0K 210.8K
20:30 USD Initial Jobless Claims 1,140K 1,186K
Friday– 14th August 2020
10:00 CNY Industrial Production (YoY) (Jul) 4.7% 4.8%
20:30 USD Core Retail Sales (MoM) (Jul) 1.6% 7.3%
20:30 USD Retail Sales (MoM) (Jul) 1.8% 7.5%