13 April 2020              Weekly Analysis

GCMAsia Weekly Report: April 13 – 17

Market Review (Forex): April 6 – 10

US Dollar

The dollar index which measured its value against a basket of six major currency pairs giving up some of its previous gains last week and fell, while closing last Friday market session at the price of 99.47 amid worsening coronavirus outbreak in the U.S and Fed latest measures. At the same time, weak economic data also contributed to the weakness of the dollar.

 

Following the worsening condition of coronavirus that further impact the economy of the biggest economic powerhouse, Fed have set up a new lending plans last week that would provide extra $2.3 trillion in loans in order to support the economy. In a statement, Fed Chairman Jerome Powell said the central bank is trying to “provide as much relief and stability as we can” during this period where Americans are staying at home to stop the spread of the pandemic. The program would offer 4-year loans to companies of up to 10,000 employees and also buy municipal bonds. On the coronavirus front, U.S have achieved another grim milestone as the coronavirus death in the U.S have surpassed Italy, making the country with the highest reported death toll which have more than 20,000 deaths on Saturday. Following the surging numbers, U.S President Donald Trump has issued major disaster in all 50 states for the first time in history where the declarations make federal funding available for state and local governments, as well as some nonprofit organizations, according to the White House. Besides that, key economic data such as weekly jobless claims and consumer sentiment last week also pressured the dollar. Initial Jobless Claims jumped by 6.606m in the week ending, 3rd April, following a 6,867m rise the week prior while the Michigan Consumer Sentiment Index slid from 89.1 to 71.0, which was the largest decline on record.

 

As the coronavirus virus are expected to surge further and threaten the U.S and global economy, investors would continue to focus on the coronavirus numbers as well with the monetary and fiscal tools that are implemented by the Fed. Besides that, market will also concentrate on Wall Street performance and also treasury yield curve as an economic indicator for the greenback.

 

USD/JPY

Pair of USD/JPY was traded lower last week while ending last Friday session at the price of 108.31. The safe-haven yen was bid by investors last week mostly due to broad weakness in U.S dollar. On top of that, Japanese Prime Minister Shinzo Abe have also made his move by declared a state of emergency to fight new coronavirus infections in major population centers and approves a near $1 trillion stimulus package to combat the impact of COVID-19 coronavirus. Compared with U.S Fed stimulus, the size of last week’s Fed package was two times the size of Japan’s stimulus.

 

EUR/USD

Pair of EUR/USD remain steady last week while closing last Friday’s trading session with the price of 1.0935 following weak sentiment on greenback as well as a compromise from EU finance ministers. On early last week, the EU Finance Ministers failed to agree on issuing corona bonds to counter the effects of the coronavirus on the Eurozone economy.  However, EU finance ministers have agreed a €500 billion rescue later in the week for European countries hit hard by the coronavirus epidemic. However, the number was fell short of the numbers that the ECB was looking for.

 

GBP/USD

The pair of GBP/USD remains resilient throughout the entire week and closing its market at 1.2450. The pound sterling gained on last week after news of Boris Johnson coming out of ICU and the readiness of BoE. Previously, Boris Johnson was taken to London’s St Thomas’ Hospital after testing positive for Covid-19 and spent three nights in intensive care before returning to a ward on Thursday. Besides that, the pound sterling was also support by BoE where it announced last week that is stands ready to finance the government to accommodate additional spending needed as a result of the virus outbreak.

 

Market Review (Commodities): April 6 – 10

GOLD

Gold price continue to remain resilient and traded steadily in overall last week while closing its market on Friday at $1686.65 a troy ounce as the worsening condition of coronavirus especially in the U.S continue to diminish risk-on mood and increased the appeal of safe-haven assets. Earlier last week, gold price was traded higher after U.S have surpassed Italy for the highest number of deaths in Covid-19. Fed Chairman Jerome Powell said the central bank is trying to “provide as much relief and stability as we can” during this period where Americans are staying at home to stop the spread of the pandemic and approve a 2.3 trillion lending stimulus. The program would offer 4-year loans to companies of up to 10,000 employees and also buy municipal bonds. The Fed stimulus coupled with the ongoing coronavirus outbreak has since continue to provide support to the yellow metal.

 

CrudeOIL

The crude oil price experience a huge sell-off pressure last week and plummeted while closing last Friday session with $23.14 per barrel despite with OPEC+ agreement on output cut. Moreover, the sentiment for the black commodity have also diminished further after Mexico refused to join in the effort of output cut and negative reports on inventories.

 

Earlier last week, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia which mostly known as OPEC+, have agreed to a 10 million per day cuts to global oil productions. A delegate from the cartel mentioned that the OPEC will follow 60% of the proposed cut while allies will offer 40% of the promised figures. Iran’s Oil Minister also stated that the cut will be of 10-11 million bps.  However, the market was unimpressed last week as Mexico refused to join on the production cut plan and logged off the OPEC+ alliance’s videoconference emergency meeting after nine hours of talks on Thursday, thus causing the commodity to experience a huge pressure after the rejection. Mexico said it would only cut output by a quarter of the amount demanded by OPEC+. Moreover, investors markets decided that a 10 million bpd cut was insufficient to balance the demand deficit. On data front, the weekly EIA data was also negative. Crude inventories jumped by 15.2 million barrels, causing further concern on oversupply issue despite with production cut agreement.

 

Still, Investors would continue to focus on the ongoing headlines of the coronavirus as well inventory levels in order to receive further trading signals

 

Weekly Outlook: April 13 – 17

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 economic data such as U.S Retail Sales and weekly jobless claims to attain further confirmation.

 

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: April 13 – 17

 

Time Market Event Actual Forecast Previous
Wednesday – 15 April 2020
04.30 USD API Weekly Crude Oil Stock 11.938M
20.30 USD Retail Sales (MoM) (Mar) -7.0% -0.5%
22.00 CAD BoC Monetary Policy Report
22.00 CAD BoC Rate Statement
22.00 CAD BoC Interest Rate Decision 0.25%
22.30 CrudeOIL Crude Oil Inventories 9.271M 15.177M
23.15 CAD BOC Press Conference
Thursday –16 April 2020
09.30 AUD Employment Change (Mar) -40.0K 26.7K
16.00 EUR German Ifo Business Climate Index (Apr) 86.1
20.30 USD Building Permits (Mar) 1.300M 1.452M
20.30 USD Initial Jobless Claims 4606K 6606K
20.30 USD Philadelphia Fed Manufacturing Index (Apr) -30.0 -12.7
Friday– 17 April 2020
09.30 AUD Retail Sales (MoM) 0.5%
10.00 CNY GDP (YoY) (Q1) -6.0% 6.0%
10.00 CNY Industrial Production (YoY) (Mar) 7.0% -13.5%
17.00 EUR CPI (YoY) (Mar) 0.7% 0.7%