16 December 2019 Weekly Analysis
GCMAsia Weekly Report: December 16 – 21
Market Review (Forex): December 09 – 14
US Dollar
The dollar index which measure its value against a basket of six major currency plunged throughout the entire last week while closing its Friday market at 97.10. Greenback received a significant selloff against its rivals amid easing in trade tension, a series of downbeat data and dovish stance from Federal Reserve (Fed).
Early last week, dollar index was traded flat near the level of 97.50 due to lack of signal from the economic data and progress in trade war. Nonetheless, greenback faced huge sell off pressure from the market after the announcement of dovish tilt FOMC statement. In the Fed meeting, the board members of Fed decided to leave its interest rate unchanged at 1.75%, while emphasizing that the risk of global growth slowing down and lack of progress in trade war are still haunting the development of US economy. Besides, Fed Chairman Jerome Powell also reiterated that they are still working hard on their monetary policy as it is challenging for them to push the inflation rate back to 2% target as of now. Therefore, it is believingly that Federal Reserve will not change its interest rate pace through the year 2020 unless persistent and significant rise in inflation appeared.
Next, dollar index further sold off by the market investors after a string of bleak data been announced near the end of last week. According to Census Bureau, US Core Retail Sales and Retail Sales data came in at 0.1% and 0.2%, weaker than economist forecast of 0.4% and 0.5% respectively while indicating a sign of slowing down in consumer spending behavior which seemingly due to trade gridlock between US and China in last few months. With regards to trade war, US and China have finally achieved consensus in trade deal after 18 months of endlessly trade war. In the deal, US agreed to cease its new round of tariff that planned to set in on last Sunday while China will purchase billions of dollars agricultural products from US as return. Besides, Donald Trump also tweeted that both countries trade representatives will start the phase 2 trade talk immediately as the trade sentiment is still remain fragrant. Easing of trade war lifted the market risk appetite and eventually urged the investor to shift their portfolio into risky asset such as Australian dollar and New Zealand dollar. At this moment, investors will eye on the further development of trade talk and more economic data in order to gauge the direction of dollar.
USD/JPY
Pair of USD/JPY skyrocketed last week while ending last Friday session at the price of 109.35. Last week, a series of global good news from US and China trade deal and UK general election has tampered the market risk avoidance behaviors. The sentiment of safe haven market fall even further after a downbeat data been released in Japan. According to Bank of Japan, Tankan Large Manufacturers index came in at 0, lower than economist expectation of 2 while showing manufacturing sector has no sign of improvement recently. Thus, greater appetite for risk continue to outweigh the bearish trend of this pair.
EUR/USD
Pair of EUR/USD rose last week while closing last Friday’s trading session with the price of 1.1120. The pair received large buy in pressure due to weakening of greenback and positive development of Brexit. Last week, a series of downbeat data from US region lifted up the demand of other market currencies such as euro. Moreover, party conservatives which lead by Boris Johnson has eventually won the general election with majority, heightened the possibility of UK able to exit European Union before the deadline on 31th January 2020. If a smooth Brexit occur between UK and EU, it would eventually benefited the both countries economy in term of future trade condition.
GBP/USD
The pair of GBP/USD shoot up throughout the entire last week while closing its Friday market at 1.3340. Last week, investor chose to put more capital into pound market, betting on Boris Johnson’s party will set to win a clear majority parliamentary seat in general election on Friday. In the YouGov final poll, the result showed that party conservatives will win 368 seats in the general election while Labour party is expected to hold 191 seats only. Nevertheless, Conservative Party managed to win in the general election as forecasted in the Exit poll, while gaining an 80-seat majority versus the opponent parties. After this general election, market will still continue to eye on the Brexit development as the first job of Boris Johnson administration will be to vote on the Withdrawal Agreement Bill.
Market Review (Commodities): December 9 – 14
GOLD
Gold price had undergo large volatile transaction throughout the entire last week while closing its Friday market at $1474.40 a troy ounce. Earlier last week, gold received a huge demand from market after pessimistic data been released in US region, such as US core retails sales which disappointed the market participants. Moreover, bullish momentum continued to weigh on this yellow metal after Fed released its dovish stance toward the future US economy outlook. However, the gains of gold was limited after positive progress in trade deal and election victory by party conservatives. Thus, it eventually lifted up the market risk appetite and dragged down the demand of safe haven asset.
CrudeOIL
Oil price was traded higher while closing last week market session with $59.75per barrel. The oil price was lifted up by the market participants throughout the entire last week amid positive development of trade talk between US and China.
In the earlier of the week, this black commodity sold off by the market participants after the US inventories data showed a stockpile in crude oil inventories level. According to API, crude oil inventories data came in at 1.410M, higher than the economist forecast of a decline in inventories level at 3.720M. Besides, EIA crude oil inventories also showed a hefty build in crude oil level. The crude oil data came in at 0.822M, compared to the economist forecast of inventory draw with 2.763M, while showing demand of crude oil has weakened due to previous pessimism of trade development.
Besides, oil price continue to receive huge buying momentum after US and China agreed to ceasefire on two and half years of on and off negotiations. Investor regains confident toward the oil market as they believe that the end of trade war will definitely lift up the future oil demand. Besides, recent extension of oil cut production by OPEC and its allies also supporting the oil price to goes up. As of now, investor will continue to eye on more inventories data in order to gauge the further direction of oil market.
Weekly Outlook: December 16 – 21
For the week ahead, investors will pay attention upon key event such as Philadelphia Fed Manufacturing and GDP data in order to gauge the direction of the currencies.
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: December 16 – 21
| Monday, December 16 |
Data CNY – Industrial Production (YoY) (Nov) GBP – Manufacturing PMI GBP– Services PMI
Events N/A
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| Tuesday, December 17 |
Data GBP – Average Earnings Index +Bonus (Oct) GBP – Claimant Count Change (Nov) USD – Building Permits (Nov)
Events AUD – RBA Meeting Minutes
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| Wednesday, December 18 |
Data CrudeOIL – API Weekly Crude Oil Stock EUR – German Ifo Business Climate Index (Dec) GBP – CPI (YoY) (Nov) EUR – CPI (YoY) (Nov) CrudeOIL – EIA Crude Oil Inventories
Events N/A
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Thursday, December 19 |
Data NZD – GDP (QoQ) (Q3) AUD – Employment Change (Nov) JPY – BoJ Interest Rate Decision GBP – Retail Sales (MoM) (Nov) GBP – BoE Interest Rate Decision (Dec) USD – Initial Jobless Claims USD – Philadelphia Fed Manufacturing Index (Dec)
Events JPY – BoJ Press Conference GBP – BoE MPC Meeting Minutes
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Friday, December 20
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Data GBP– GDP (YoY) (Q3) USD – GDP (QoQ) (Q3) CAD– Core Retail Sales (MoM) (Oct)
Events N/A |
| Saturday, December 21
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Data
CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events N/A
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