11 May 2020               Weekly Analysis

 GCMAsia Weekly Report: May 11 – 15

Market Review (Forex): May 4 – 8

US Dollar

The dollar index which traded against a basket of six major currency pairs have fell while closing last week session at the price of 99.71 following a slew of disappointing data. Besides that, the increasing expectation of negative interest rate as well as worsening coronavirus in the U.S also diminished further confidence towards the greenback.

 

Last week, economic data in the U.S did not provide much support for the greenback to stage a comeback. Factory orders have tumbled from -9.7% to -10.3% in March. Trade balance also proved weak with the reading of -44.40B against market expectation of -44.00B and the service sector in the U.S have also fell with the reading of 26.7 against the expectation of 27.0. On top of that, ISM Non-Manufacturing PMI also slid from 52.5 to 41.8. The employment data also tested market resilience throughout the week. ADP Nonfarm Employment Change came in with -20,236K, missing market forecast of -20,050K while initial jobless claims jumped by another 3.169m in the week ending 1st May. Despite with improving NonFarm Payrolls and Unemployment Rate on Friday, the positive data could not excite the greenback. Following all these data, investors have already started to increase their expectation of Federal Reserve cutting its official interest rates below zero for the first time ever despite with the U.S. Federal Reserve previously stated that that it does not view negative rates as “appropriate”. Moreover, the increasing cases of coronavirus in the U.S continue to dampened market confidence. In the U.S, the total rose by 189,444 to 1,318,504. In the week prior, the total number of new cases had risen by 204,064.

 

With the ongoing coronavirus and the economy in the U.S expected to deteriorate further, the advantage of the U.S dollar is getting thinner while investors continue to focus on upcoming data and coronavirus news to gauge further sentiment for the greenback.

 

USD/JPY

Pair of USD/JPY have rose last week while ending last Friday session at the price of 106.63. In economic data, Japan household spending have slide by 4% in March while service sector activity in Japan also ground to a halt, with the finalized PMI revised down from 22.8 to 21.5. In March, the PMI had stood at 33.8. With most stats are skewed to the negative, the Japanese Yen have faced some selling pressure throughout last week.

 

EUR/USD

Pair of EUR/USD manage to hold its ground in overall last week, but struggle to gain momentum throughout the week while closing last Friday session at the price of 1.0838. In the Eurozone, most data were heavily skewed to the negative once more. For Italy and Spain, Manufacturing PMIs were on the slide and its Services PMI data delivered a market shock. On top of that, Eurozone retail sales also slumped with an 11.20% fall coming before the April lockdown, thus limiting the potential upside for the Euro.

 

GBP/USD

The pair of GBP/USD have rose throughout the entire week while closing its market at 1.2414. On data front, Service PMI for April have improved to 13.4, higher than market expectation of 12.2 while construction PMI came in weaker with the reading of 8.2 against market forecast of 22.0. However, it was the BoE that provide the much-needed support for the pound sterling. Despite with BoE delivering a gloomy economic outlook, its decision to keep its policy unchanged boosted the pair.

 

Market Review (Commodities): May 4 – 8

GOLD

The safe-haven gold remains steady in overall and traded higher in overall throughout the week while closing its market with the price of $1706.47 a troy ounce. Following the deteriorating economic activity in the U.S and the increasing expectation of negative interest rate as well as ongoing coronavirus, the demand for the safe-haven gold remain resilient as investors continue to shift their portfolio into safe-haven market for risk-aversion.

 

CrudeOIL

The price of crude oil managed to continue its ascension throughout the week while closing last Friday session with the price of $24.62 per barrel following the ongoing rebound of demand as well as production cuts continue to weigh positively on the commodity. Moreover, the decision of price hike from Saudi Arabia also provide further boost for the commodity.

 

Last week, Saudi Arabia’s state oil company, Aramco have announced that it would raise prices to boost the commodity’s recovery. According to Bloomberg, the price hike will be applied to oil of almost all grades for the month of June. The boosted prices by the kingdom come as OPEC and its allies are preparing for production cuts this month to combat the huge collapse in global oil demand due to the coronavirus pandemic. By increasing pricing for Asia, Aramco is also stated that it has seen its demand starting to recover in its largest regional market. The Chinese oil imports have also rebounded last month, according to reports. As most major economies are seen re-opening up the lockdowns, hopes for a pick-up in the business and travel activity also help supporting the demand for the commodity.

 

However, as coronavirus continue to persist and market fears of a second coronavirus wave, market remains wary while investors continue to observe the future development in the commodity.

 

Weekly Outlook: May 11 – 15

For the week ahead, investors would continue to monitor the latest developments with regards of the outbreak of the coronavirus and important economic data such as U.S Retail Sales to gauge further sentiment.

 

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: May 11 – 15

 

Time Market Event Actual Forecast Previous
Tuesday – 12 May 2020
20.30 USD Core CPI (MoM) (Apr) -0.2% -0.1%
Wednesday – 13 May 2020
10.00 NZD RBNZ Interest Rate Decision 0.25% 0.25%
10.00 NZD RBNZ Rate Statement
11.00 NZD RBNZ Press Conference
14.00 GBP GDP (MoM) -0.1%
14.00 GBP Manufacturing Production (MoM) (Mar) -5.7% 0.5%
20.30 USD PPI (MoM) (Apr) -0.5% -0.2%
22.30 CrudeOIL Crude Oil Inventories 4.590M
Thursday – 14 May 2020
09.30 AUD Employment Change (Apr) -575.0K 5.9K
10.00 NZD Annual Budget Release
20.30 USD Initial Jobless Claims 2500K 3169K
23.15 CAD BoC Gov Poloz Speaks
Friday – 15 May 2020
10.00 CNY                 Industrial Production (YoY) (Apr) 1.5% -1.1%
14.00 EUR                 German GDP (QoQ) (Q1) -2.1% 0.0%
20.30 USD                 Core Retail Sales (MoM) (Apr) -8.6% -4.2%
20.30 USD                 Retail Sales (MoM) (Apr) -11.6% -8.4%
22.00 USD                 JOLTs Job Openings (Mar) 6.882M