12 October 2020                    Weekly Analysis

GCMAsia Weekly Report: October 12 – 16

Market Review (Forex): October 5 – 10

US Dollar

The dollar index which traded against a basket of six major currency pairs slumped last week amid positive hopes of at least some new fiscal stimulus would be implemented before 3rd November 2020 U.S. Presidential Election, which spurring risk appetite in the FX market while prompting investors to shift their portfolio toward other riskier currencies such as Euro and Pound. The Dollar Index was closing its price on last Friday session at the price of 92.95.

According to Reuters, the U.S President Donald Trump urged the Congress that they should quickly extend $25 billion in new payroll assistance in the U.S. airlines industries as air travel remains down sharply amid the coronavirus pandemic. Besides, the Trump administration has called on Congress to pass a coronavirus relief bill using leftovers funds from an expired small business loan programmed, which total approximately $130 billion. Nonetheless, Alzazeera reported that the Treasury Secretary Steve Mnuchin and White House Chief of State Mark Meadows said they would continue to talk to Senate Democratic leader Chuck Schumer and House Speaker Nancy Pelosi in order to reach consensus on the aggressive economic stimulus bill. As for now, investors would highly focus on the latest economic stimulus plan from the United States in order to receive further trading signal. In addition, the US Dollar received further bearish momentum over the backdrop of the dovish tone from the Federal Reserve last week. The Federal Reserve’s William stated that the economic outlook for the U.S. economic is highly uncertain while reiterated that some parts of the economic sector were still struggling from the coronavirus pandemic. Meanwhile, the Chicago Federal Reserve President Charles Evans also reiterated that the U.S. Central bank will likely to remain its expansionary monetary policy stance in long-term in order to meet its inflation goal.

On the economic data front, most of the U.S. economic data on last week were mostly dominated by the dismal reading, despite some of the data were fared better than expectation. According to Department of Labour, the U.S. JOLTs Job Openings and U.S Initial Jobless Claims came in at 6.493M and 840K, which fared worse than the expectation at 6.685M and 820K respectively. Nonetheless, the losses experienced by the US Dollar was limited following U.S. ISM Non-Manufacturing Purchasing Managers Index (PMI) came in at 57.8, which better than the market forecast at 56.3.

 

USD/JPY

Pair of USD/JPY was traded lower last week while ending last Friday session at the price of 105.60. The overall bearish momentum for the pair was mainly due to the depreciation of the US Dollar. Besides, the safe-haven Japanese Yen received further bullish momentum amid uncertainty with regards of the global geopolitics risk following the impasses with regards of the economic stimulus plan from the United States still remained, which spurring risk-off sentiment in the FX market while insinuating market demand for the safe-haven Yen.

 

EUR/USD

Pair of EUR/USD surged on last week while closing last Friday’s trading session with the price of 1.1815. 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 over the backdrop of the string of upbeats economic data from the European region. According to Markit Economics, the Eurozone Market Composite Purchasing Managers Index (PMI) and Eurozone Services Purchasing Managers Index (PMI) came in at 50.4 and 48.0, which fared better than the market expectation at 50.4 and 47.6 respectively. As for now, investors would scrutinize the latest updates with regards Brexit deal in between United Kingdom and European Union in order to receive further trading signal.

 

GBP/USD

The pair of GBP/USD higher on last week while closing its market at 1.3028. The Pound Sterling surged on last week amid positive prospect for a Brexit deal to approve, which dialed up the market optimism toward the economic progression for both European Union and United Kingdom. According to Reuters, the UK Prime Minister Boris Johnson and European Council President Charles had reached a consensus for the Brexit deal on last Wednesday, though significant differences still persisted. As for now, the 27 national leaders are due to assess progress with regards of the Brexit issues when they meet in Brussels on 15th and 16th October. If both parties decide a deal is in the making, they would authorize a final stretch of extremely secretive deal.

Market Review (Commodities): October 5 – 10

GOLD

Gold price was traded higher in overall last week while closing its market on Friday at $1928.95 per troy ounce. The safe-haven gold received significant bullish momentum in last week as a falling U.S. Dollar had spurred foreign demand for the dollar-denominated asset. As for now, market participants expected a higher probability of the aggressive stimulus plan from the United States in future following the US Parliament resumed their talks in order to reach consensus on the aggressive economic stimulus bill. In fact, some investors speculated that massive stimulus plan from the central bank would prompt the future inflation to rise significantly, which diminishing the value of the currency while prompting investors to shift their investment from cash into safe-haven gold.  Nonetheless, investors would continue to scrutinize the latest updates with regards of another coronavirus stimulus plan which would be voted on the legislation this week in order to gauge the likelihood movement for the commodity.

 

CrudeOIL

The crude oil price surged on last week while closing last Friday session with $41.25 per barrels. The oil market surged significantly following the OPEC unleashed its optimistic tone over the market demand on the crude oil price in future. According to Reuters, the Secretary General Mohammad Barkindo said that OPEC is going to manipulate the oil market while reiterated that the worst time for the oil industry is over. Besides, the oil market received further bullish momentum amid the fears of supply disruption resurgence in the oil industry. According to the latest reports, Hurricane Delta is expected to intensify into a category-3 hurricane in the Gulf Coast and nearly 1.5 million barrels of daily output has been halted.  Nonetheless, the gains experienced by the crude oil price was limited following the oil inventory data was released. According to the Energy Information Administration, The U.S. Crude Oil Inventories came in at 0.501M, worse than the market forecast at 0.294M. Besides, the spiking numbers of the coronavirus cases in the European as well as the other region, had renewed fears of mobility restrictions while affecting the ongoing oil demand recovery in the future.

 

Weekly Outlook: October 12 – 16

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 latest economic stimulus bill from the United States in order to receive further trading signals.

 

As for oil traders, they will be eyeing on US inventories level reported by API and EIA as well as coronavirus vaccine development to gauge the strength of crude demand for world’s largest oil consumer.

 

Highlighted economy data and events for the week: October 12 – 16

Time Market Event Actual Forecast Previous
Monday – 12nd October 2020
N/A
Tuesday – 13rd October 2020
14:00 GBP Average Earnings Index +Bonus (Aug) -0.6% -1.0%
14:00 GBP Claimant Count Change (Sep) 80.0K 73.7K
17:00 EUR German ZEW Economic Sentiment (Oct) 74.0 77.4
20:30 USD Core CPI (MoM) (Sep) 0.2% 0.4%
Wednesday – 14th October 2020
20:30 USD PPI (MoM) (Sep) 0.2% 0.3%
Thursday – 15th October 2020
04:30 CrudeOIL API Weekly Crude Oil Stock 0.951M
08:30 AUD Employment Change (Sep) -35.0K 111.0K
20:30 USD Initial Jobless Claims 830K 840K
20:30 USD Philadelphia Fed Manufacturing Index (Oct) 15.0 15.0
23:00 USD Crude Oil Inventories 0.294M 0.501M
Friday – 16th October 2020
06:45 NZD CPI (QoQ) (Q3) -0.5% -0.5%
17:00 EUR CPI (YoY) (Sep) -0.3% -0.3%
20:30 USD Core Retail Sales (MoM) (Sep) 0.4% 0.7%
20:30 USD Retail Sales (MoM) (Sep) 0.6% 0.6%