15 June 2020               Weekly Analysis

GCMAsia Weekly Report: June 15 – 19

Market Review (Forex): June 8 – 12

US Dollar

The dollar index which measured its value against a basket of six major currency pairs continue to extend its losses in the first half of the week before reversing some of the losses and ending last week session at the price of 96.94 due to worsening outlook and a warning from the U.S Federal Reserve.

 

Last week, the FOMC policy decision and press conference was the main event. Although the Federal Reserve have maintained its interest rate at 0.25%, a reality check from Jerome Powell have caused the market sentiment to take a dive. According to Fed statement, U.S financial system remains under stress because of the coronavirus pandemic and that the path back to steady growth and a strong labor market is unsure. Besides that, it has also projected a 6.5% decline in gross domestic product this year and a 9.3% unemployment rate at year’s end which signaling a long journey ahead of economic. Due to the dovish statement, the market confidence towards the greenback taking a hit. On data front, the key data were just limited to weekly jobless claims and consumer sentiment. According to the official data, weekly jobless claims rose by 1.542m, better than market expectation with the reading of 1.550m. The Michigan Consumer Sentiment Index also rising from 82.3 to 87.8 much to investors delight, which helping the greenback to gain some support before ending the week.

 

However, as domestic tension remains high on the murder of George Floyd and as well as tensions between the U.S and China, the upside potential for the greenback remains challenged while market awaits further development to gauge further direction for the greenback.

 

USD/JPY

The pair of USD/JPY manage to regain some support on Friday while ending last Friday session at the price of 107.36. Following a relatively quiet week on the data front, the momentum in Japanese Yen was mostly followed towards the U.S weakness. The risk aversion which supported by dovish U.S Fed help delivered the support, thus driving its demand and value for the safe-haven Yen.

 

EUR/USD

Pair of EUR/USD have fell in overall for the week, but manage to recoup some losses before ending session at the price of 1.1255. On data front, industrial production for April have tumbled by 17.9% in Germany and 17.1% in the Eurozone. On top of that, Germany trade surplus also narrowed from €12.8bn to €3.2bn in April. As the stats were a disappointing, the euro unable to provide any market confidence, thus dragging its value despite with the weakness in the greenback.

 

GBP/USD

The pair of GBP/USD have tumbled throughout the previous week while closing its market at 1.2538. The stats were heavily skewed to the negative, with the UK economy contracting by an alarming 24.5% in April. Besides that, besides that, manufacturing production also fell by 24.3% as the lockdown led to a closure of all non-essential businesses. It was the country’s largest contraction on record and led assurance from the BoE Governor Bailey to stand ready on taking further action if necessary.

 

Market Review (Commodities): June 8 – 12

GOLD

Gold price remains steady and stood itself on high ground throughout the week with the price of $1734.22 a troy ounce. Following the easing appeal for greenback and tension in the U.S, the demand for the commodity remains strong. On the other hand, concerns about deeper global recession and the potential of second wave coronavirus also help increasing the appeal for the safe-haven metal.

 

CrudeOIL

The price of crude oil snaps its 6-week rally and plummets throughout the week while ending last week session at the price of $36.72 per barrel following investors paying attention to the record stockpiles in U.S. crude and hefty builds in fuel products like diesel that hedge funds and other bullish investors in oil had ignored for weeks.

 

On data front, the Energy Information Administration (EIA) on Wednesday reported an oil inventory draw of 5.72 million barrels. According to official sources, the U.S commercial crude oil inventories now stands at 538 million barrels, surpassing previous levels seen back in the earlier 2017 and the highest level going as far back as 1982. On top of that, inventories in diesel also as startling as crude stockpile where the diesel also soared by 1.6 million barrels last week. On the other hand, the resurfaced tension between U.S and Iran may weigh further on the commodity. Recently, an Iranian news agency close to the elite Revolutionary Guards stated on Saturday Iran’s naval forces were preparing to target U.S. commercial vessels in the Gulf last month in case U.S. forces interfered with Venezuela-bound Iranian oil tankers. However, the decline in U.S oil rigs have helped the commodity to reverse some losses at the end of the week. According to Bakers Hughes, the number of active oil rigs in the U.S fell to 199, its lowest level since June 2009.

 

Still, due to increasing inventory build, U.S tensions between Iran and China as well as the possibility of second wave coronavirus, the outlook for the black commodity remains gloomy in overall while investors continue to focus on ongoing news to attain further signal for the direction.

 

Weekly Outlook: June 15 – 19

For the week ahead, investors would continue to focus on the ongoing developments between the U.S and China and important economic data such as Retail Sales to determine further direction. Besides that, market will also be paying attention to the updates about the coronavirus.

 

As for oil traders, they will be eyeing on US inventories level reported by API and EIA as well as the possibility of tension between Iran and U.S to gauge the strength of crude demand for world’s largest oil consumer.

 

Highlighted economy data and events for the week: June 15 – 19

Time Market Event Actual Forecast Previous
Monday – 15 June 2020
10.00 CNY Industrial Production (YoY) (May) 5.0% 3.9%
Tuesday – 16 June 2020
09.30 AUD RBA Meeting Minutes
12.30 JPY BoJ Monetary Policy Statement
14.00 GBP Average Earnings Index +Bonus (Apr) 1.4% 2.4%
14.00 GBP Claimant Count Change (May) 370.5K 856.5K
15.00 JPY BoJ Press Conference
17:00 EUR German ZEW Economic Sentiment (Jun) 60.0 51.0
20:30 USD Core Retail Sales (MoM) (May) 5.1% -17.2%
20:30 USD Retail Sales (MoM) (May) 8.0% -16.4%
Wednesday – 17 June 2020
14.00 GBP CPI (YoY) (May) 0.5% 0.8%
17.00 EUR CPI (YoY) (May) 0.1% 0.1%
20.30 USD Building Permits (May) 1.248M 1.066M
20.30 CAD Core CPI (MoM) (May) -0.4%
22.30 USD Crude Oil Inventories -1.738M 5.720M
Thursday – 18 June 2020
06.45 NZD GDP (QoQ) (Q1) 0.5% 0.5%
09.30 AUD Employment Change (May) -125K -594.3K
15.30 CHF SNB Interest Rate Decision -0.75% -0.75%
15.30 CHF SNB Monetary Policy Assessment
16.00 CHF SNB Press Conference
19.00 GBP BoE Interest Rate Decision (Jun) 0.10% 0.10%
19.00 GBP BoE MPC Meeting Minutes
20.30 USD Initial Jobless Claims 1542K
20.30 USD Philadelphia Fed Manufacturing Index (Jun) -25.0 -43.1
Friday – 19 June 2020
09.30 AUD Retail Sales (MoM) -17.7%
14.00 GBP Retail Sales (MoM) (May) 5.8% 5.8%
20.30 CAD Core Retail Sales (MoM) (Apr) -12.8% -0.4%