16 November 2020                Weekly Analysis

 

GCMAsia Weekly Report: November 16 – 20

Market Review (Forex): November 9 – 13

US Dollar

Dollar index which traded against a basket of six major currencies have recovered partially from its previous slide but still experience selling pressure at the end of the week while closing last week session at the price of 92.65. Reports of high vaccine efficiency become the major driver for the market but weak data also weigh on the market.

 

Last week, German company BioNTech and its U.S partner Pfizer have announced on Monday that the early results from phase 3 trials showed that their vaccine achieved 90% efficiency in preventing COVID-19 infections. The statement from the two companies is the first release of successful data from a large-scale trial of coronavirus vaccines. However, initial optimism starting to fade as market remains concern on the logistical challenges where the vaccine must be stored at -70C and how to distribute to global market swiftly.

 

On data front, JOLTs job openings for September disappointed with a decline from 6.493m to 6.440m, it was yet another red flag for the labor market. Jobless claims figure provide a more upbeat reading with the reading of 709K, better than previous week of 757K. Still, it was not enough to ease concerns over labor market. On top of that, U.S CPI also fell with the reading of 0.0%, lower than market expectation of 0.1%.

 

Nonetheless, investors will now continue to focus on the ongoing development on vaccine. At the same time, market will also eye on the economy health which can be reflected by its economic data.

 

USD/JPY

The pair of USD/JPY have fell throughout the week while ending last Friday session at the price of 104.59. On data front, current account figures had muted impact on the Japanese Yen. However, the worsening conditions of coronavirus have help bolstered the demand for safe-haven Yen. Despite with the enthusiasm of potential vaccine, the fast increase of infection and deaths have offset the optimism which caused investors to slowly move into safe-haven market during the week.

 

EUR/USD

The pair of EUR/USD have manage to closed the week in gains while ending last Friday’s trading session with the price of 1.1836. Despite with a slew of disappointing data, the Euro was mostly pushed by the assurance from ECB and also dollar weakness. On the monetary policy, ECB President Lagarde have assured the markets of more support next month. The comments came following upbeat vaccine trial numbers from Pfizer Inc.

 

GBP/USD

The pair of GBP/USD have experience ups and down throughout the week but still manage to ending the market with a gain at the price of 0.3221. On data front, UK Retail Sales rose by 5.2%, falling short of a 6.1 in September. Jobs data in the U.K also disappoints with unemployment rate rose from 4.5% to 4.8%. However on the positive side, claimant count change unexpectedly fell by 40.2k. Despite with overall weak data, the pound remain supported by Brexit updates. Last week, UK PM Johnson’s special advisor and arch-Brexiteer Dominic Cummings had decided to resign from government service immediately. The resignation was taken as a positive note that it would improves the chances of EU and UK to be able to agree on a free trade deal.

 

Market Review (Commodities): November 9 – 13

GOLD

Gold price experience a huge sell on the first half of the week, but slowly recoup its losses on last Friday while ending at the price of $1933.48 per troy ounce. Following the surprise announcement on vaccine and election drama, the demand for the safe-haven commodity have decline sharply following prospect of economic recovery urged investors to favor the U.S dollar. On top of that, rocketing U.S treasury yields and surging U.S equity futures boosted by the news also extend further pressure which further drive demand away from the non-yielding yellow metal.

 

CrudeOIL

The crude oil price have jumped throughout the first half of the week and slowing taking profit until the closing market, ending last Friday session with $40.04 per barrel following prospect of vaccine and OPEC plans to delay output hike.

 

Last week, the world’s largest pharmaceutical company Pfizer announced that its Covid-19 vaccine showed a 90% success rate in an interim analysis of its phase 3 clinical trial. The major vaccine breakthrough raised hopes for a faster pace of economic recovery and thus brightened the prospects for energy demand. On top of that, expectations of OPEC and its allies to extend its output reduction plan also provide boost for the commodity. Last week, OPEC+ ministers talked openly about the possibility of tweaking their oil-cuts deal, the latest signal that the group is reconsidering its January production hike. OPEC and its allies are due to boost output next year, easing 7.7 million barrels of daily production cuts by almost 2 million barrels. They have the ability to change that plan if needed, but all members would have to agree.

 

Still, OPEC also lowered its forecast of oil demand last week after a continued increase of coronavirus may slowed recovery. Even if Pfizer’s vaccine is proven successful, it may still take several months before it becomes publicly available.

 

Weekly Outlook: November 16 – 20

For the week ahead, investors would continue to monitor on the development of coronavirus, vaccine and also crucial inflation such as Retail Sales in order to gauge the direction of every each currency’s pair.

 

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: November 16 – 20

Time Market Event Actual Expectation Previous
Monday – 16th November 2020
10:00 CNY Industrial Production (YoY) (Oct) 4.4% -7.9%
21:00 EUR ECB President Lagarde Speaks
Tuesday – 17th November 2020
08:30 AUD RBA Meeting Minutes
21:30 USD Core Retail Sales (MoM) (Oct) 0.6% 1.5%
21:30 USD Retail Sales (MoM) (Oct) 0.5% 1.9%
22:00 GBP BoE Gov Bailey Speaks
Wednesday – 18th November 2020
00:00 EUR ECB President Lagarde Speaks
15:00 GBP CPI (YoY) (Oct) 0.6% 0.5%
18:00 EUR CPI (YoY) (Oct) -0.3% -0.3%
21:30 USD Building Permits (Oct) 1.560M 1.545M
21:30 CAD Core CPI (MoM) (Oct) 0.1%
23:00 EUR ECB President Lagarde Speaks
23:30 USD Crude Oil Inventories -0.913M 4.278M
Thusday – 19th November 2020
08:30 AUD Employment Change (Oct) -30.0K -29.5K
16:00 EUR ECB President Lagarde Speaks
21:30 USD Initial Jobless Claims 705K 709K
21:30 USD Philadelphia Fed Manufacturing Index (Nov) 24.0 32.3
23:00 USD Existing Home Sales (Oct) 6.45M 6.54M
Friday– 20th November 2020
08:30 AUD Retail Sales (MoM) (Oct) -1.5% -1.1%
15:00 GBP Retail Sales (MoM) (Oct) 0.1% 1.5%
16:15 EUR ECB President Lagarde Speaks
21:30 CAD Core Retail Sales (MoM) (Sep) 0.9% 0.5%