14 September 2020              Weekly Analysis

GCMAsia Weekly Report: September 14 – 18

 

Market Review (Forex): September 07 – September 11

US Dollar

Dollar index which gauges its value against a basket of six major currencies continued to extend its gains and reached a month high level last week as upbeat economic data and uncertainties of other major currency sparked up the appeal of dollar index.

 

Earlier last week, dollar index rose further amid bullish momentum generated by NFP continue lead the dollar upward sloping. According to the Bureau of Labor Statistics (BLS), US Nonfarm Payroll data grew  by 1,371K, no far from the market economist expectation at 1,400K, showing that the US economy recovery are still in the right pace after pandemic shutdown. Besides, US unemployment rate also dropped significantly from July 10.2% to 8.4%, noticeably far lower than the economist forecast 9.8%, recorded the lowest rate by far since the outbreak of coronavirus at the beginning of this year. Besides, US labor holiday also failed to limit the gains of dollar despite thin trading volume as market participants continue digest the key economic data from US. Moreover, other major economic data such as JOLTs Job Openings, PPI and CPI have also recorded a higher-than-expected reading, which triggered larger buy volume in dollar market.

 

Nonetheless, the gains of dollar were limited after the Senate vote down the latest proposal of aid package from Mitch Connell. According to CNBC, Senate Majority Leader Mitch McConnell have rolled out a new proposal of relief package which amounted to $300 billion, while the targeted segments will be focused on healthcare, education and economy. However, no any portion of this amount will be included for direct payment to individuals or money for state and local governments, which is literally against the intention and need of what Democratic Party looking forward to. The plan thereupon voted down by the chamber, senators voiced skepticism that any movement would be made on a relief package before the election.

 

Nonetheless, investors will now continue to focus on the latest updates on vaccines and economic data in order to gauge the direction for the greenback. At the meantime, attention is also being given to the development of tension between US and China.

 

USD/JPY

The pair of USD/JPY was traded flat throughout the week while ending last Friday session at the price of 106.15. As most of the investors are awaiting for the prime minister election of Japan, hence the Japanese yen was traded thin as compare to previously. The appointment of new prime minister will able to give clearer hints for investors to gauge the direction Japanese Yen as his or her style on ruling the country may directly reflect the future of economic condition.

 

EUR/USD

The pair of EUR/USD was traded higher last week while closing last Friday’s trading session with the price of 1.1845. Last week, euro currency was managed to extend its rebound as ECB unleashed their neutral stance in the latest monetary policy decision. At the yesterday ECB meeting, the board members of ECB generally decided to maintain its interest rate at 0.00% while will keep it low until they see a strong recovery in the economy’s underlying inflation dynamics. Moreover, the pandemic emergency of purchase programme (PEPP) with a total envelope of €1350 billion will still be carried on in order to limit the downside impact of pandemic while supporting the economy back to the correct or normal path of inflation. Besides, President of ECB Christine Lagarde also revealed that they will ‘carefully monitor’ the recent appreciation of euro, but they will not overreact to it and not targeting FX rate now.

 

GBP/USD

The pair of GBP/USD have fell in overall during the end of the week while closing its market at 1.2792. Last week, pound sterling was thrown tremendously by the market participants amid uncertainty over the Post-Brexit talk. The UK and EU are currently trying to reach a trade deal before October as they believe that there will be no deal Brexit happened if a deal cannot even be successfully drafted before October. As of now, both parties are still struggle in negotiating terms and regulations of Post-Brexit trade, while dragged it to next week for further trade talk.

 

Market Review (Commodities): September 07 – September 11

GOLD

Gold price have extended its gains throughout last week while closing its market on Friday at $1939.35 per troy ounce. In overall, the appeal of this yellow metal remains scented and attracting as uncertainty around the world such as Brexit and resurgence of pandemic continue suppressed the risk appetite of investors. On pandemic front, Covid-19 has killed at least 910,300 people and more than 28 million confirmed cases have been registered up to now. Besides, the development of vaccines stalled in US after one of the vaccine trial’s candidate caused side effect on its self against the drug. Market participants will continue to pay attention over the development of vaccine and geopolitical issue in order to scrutinize the direction of gold price.

 

CrudeOIL

The crude oil price plunged significantly last week while closing last Friday session with $37.62 per barrel following market worries over the demand continues weigh on this black commodity market.

On the data front, US crude oil inventories level unexpectedly showed a little build up, lifting the market worries over the supply glut during the novel of pandemic. According to the API, US weekly Crude Oil Stock grew by 2.970M, higher than the previous reading of -6.360M barrel. Besides, EIA also recorded stockpile in US crude oil inventories level of 2.032M, higher than the economist forecast of -1.335M. Both disappointed inventories data lifted up the market fears over the unbalance situation of supply and demand in oil market during this pandemic. Besides, the resurgence of Covid-19 cases in US and other countries such as France have also dampened the market hopes over a strong recovery of oil demand in near term.

Meanwhile, market participants will continue eye on inventory data to gauge the supply level as well further development on potential coronavirus vaccine which may further determine the direction for the commodity.

 

Weekly Outlook: September 14 – 18

For the week ahead, investors would continue eye on the latest developments with regards to the development of coronavirus, tensions between U.S. and China and also crucial inflation such as Fed‘s interest rate decision and retails sales  in order to gauge the direction of major currency – US dollar.

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: September 14 – 18

Time Market Event Actual Expectation Previous
Monday – 14th September 2020
N/A
Tuesday –15th September 2020
10:00 CNY Industrial Production (YoY) (Aug) 5.1% 4.8%
14:00 GBP Average Earnings Index +Bonus (Jul) -1.3% -1.2%
14:00 GBP Claimant Count Change (Aug) 94.4K
17:00 EUR German ZEW Economic Sentiment (Sep) 69.8 71.5
Wednesday – 16th September 2020
04:30 CrudeOIL API Weekly Crude Oil Stock 2.970M
20:30 GBP CPI (YoY) (Aug) 0.1% 1.0%
20:30 USD Core Retail Sales (MoM) (Aug) 0.8% 1.9%
20:30 USD Retail Sales (MoM) (Aug) 1.0% 1.2%
20:30 CAD Core CPI (MoM) (Aug) -0.1%
22:30 CrudeOIL                 Crude Oil Inventories 2.032M
Thursday – 17th September 2020
02:00 USD FOMC Economic Projections
02:00 USD FOMC Statement
02:00 USD Fed Interest Rate Decision 0.25% 0.25%
02:30 USD FOMC Press Conference
06:45 NZD GDP (QoQ) (Q2) -12.8% -1.6%
09:30 AUD Employment Change (Aug) -50.0K 114.7K
12:30 JPY BoJ Monetary Policy Statement
15:00 JPY BoJ Press Conference
17:00 EUR CPI (YoY) (Aug) -0.2% -0.2%
19:00 GBP BoE Interest Rate Decision (Sep) 0.10% 0.10%
19:00 GBP BoE MPC Meeting Minutes
20:30 USD Building Permits (Aug) 1.510M 1.483M
20:30 USD Initial Jobless Claims 850K 884K
20:30 USD Philadelphia Fed Manufacturing Index (Sep) 15.5 17.2
Friday – 18th September 2020
14:00 GBP Retail Sales (MoM) (Aug) 0.7% 3.6%
20:30 CAD Core Retail Sales (MoM) (Jul) 0.5% 15.7%