17 August 2020                      Weekly Analysis

GCMAsia Weekly Report: Aug 17 – 21

Market Review (Forex): Aug 10 – 15

US Dollar

The dollar index which traded against a basket of six major currency pairs slumped last week amid failure of United States in managing coronavirus infections, which prompting investors to shift their portfolio toward other countries. Besides, the hopes for additional stimulus from the United States in order to combat the coronavirus had faded on last Friday following the Senate and House of Representative in recess and no fresh talks scheduled with U.S. President Donald Trump’s negotiators. However, the losses experienced by the Dollar Index was limited over the backdrop of a string of positive economic data on last week. The Dollar index was closing its price on last Friday session at the price of 93.05.

 

In the midst of the coronavirus, the United States has 5.01 million confirmed coronavirus infections and more than 160,000 deaths, more than any other country as for now. Higher coronavirus cases count in the United Stated had provided prospect for the longer business restrictions, which dialled down the market optimism toward the economic progression in the United States. On the economic stimulus front, the U.S. Treasury Secretary Steven Mnuchin said on Wednesday that the White House and top Democrats in the Congress may not be able to reach a deal on the coronavirus aid, with the stalemate blocking relief to tens of millions of unemployed Americans. Such sentiment had weighed on growth prospect for the United States, which spurring further selloff for the US Dollar.

 

Most of the economic data from United States region were dominated by positive data on last week. According to U.S. Bureau of Labor Statistics, the U.S. Core Consumer Price Index (CPI) for last month had notched up significantly to 0.6%, confounding market forecast for a reading of up to 0.2%. Similarly, the US Initial Jobless Claims came in at 963K, better than the market forecast at 1,120K while the U.S. Retail Sales for last month came in at 1.9%, which also better than the economist forecast at 1.3%. Nonetheless, investors would still continue to remain their focus on the economic stimulus plan from the United States and the coronavirus development in order to gauge the likelihood movement for the pair.

 

USD/JPY

Pair of USD/JPY was traded higher last week while ending last Friday session at the price of 106.45. The Japanese Yen suffer significant selloff over the dovish statement from Japan government. The Japan’s Economy Minister, Yasutoshi Nishiura had stated that the Japan’s economic in a severe state, which diminish market confidence toward the economic progression from the Japan region. Nonetheless, he reiterated that the government will continue to do utmost to boost up the recovery process after it bottomed out in April and May.

 

EUR/USD

Pair of EUR/USD surged on last week while closing last Friday’s trading session with the price of 1.1835. The overall bullish momentum of the pair was mostly due to the weakening in the rival currencies, especially in US Dollar. Besides, the Euro extend its gains following the German’s Finance Minister Olaf Scholtz outlined a EUR10 billion job subsidy extension plan. He reiterated that the subsidy plan from the German government will be extending up to 24 months while such subsidy would be avoiding the employee from being layoffs. Meanwhile, he also claimed that the government will be accompanying the people all the time in this crisis.

 

GBP/USD

The pair of GBP/USD surged on last week while closing its market at 1.3105. The overall bullish momentum for the pair was mainly due to the depreciation of the US Dollar. Besides, the Pound Sterling received further bullish momentum over the backdrop of the string of positive economic data from the UK region. According to Office for National Statistics, the U.K. Gross Domestic Product (GDP) for last month notched up significantly from the previous reading of 1.8% to 8.7%, much better than the market forecast at 8.05%. Similarly, the U.K. Manufacturing Production and U.K. Claimant Count Change came in at 11.0% and 94.4K, which fared better than the market forecast at 10.0% and 10k respectively.

 

Market Review (Commodities): Aug 10 – 15

GOLD

Gold price was traded lower in overall last week while closing its market on Friday at $1949.35 per troy ounce. The gold market traded with modest losses, slumped below $1950 levels on last week amid receding demand for the safe-haven assets. The emerging signs of the global economic recovery, coupled with the latest optimism over a potential vaccine for highly contagious coronavirus diseases had spurred risk appetite in the FX market, which stoked a shift in sentiment toward riskier asset. According to the New Straits Times, the Russia authorities said on Saturday that it has produced the first batch of its coronavirus vaccine, after President Vladimir Putin announced it had been first in the world to approve a vaccine. However, some scientists remained skeptical toward the vaccine development while warning that moving too quickly on a vaccine could be dangerous. Nonetheless, investors at this time would continue to scrutinize the latest updates with regards of the vaccine development in order to receive further trading signal.

 

CrudeOIL

The crude oil price surged on last week while closing last Friday session with $42.25 per barrels. The oil market surged over the backdrop of the positive inventory data from the United States region. According to Energy Information Administration (EIA), the U.S. Crude Oil inventories came in at -4.512M, lesser than the market forecast at -2.875M. In fact, the U.S Oil Rig Count declined last week from the previous reading of 176 to 172, indicating the supply for the crude oil might be decreasing in future. Moreover, the positive development for the coronavirus vaccine had spurred positive prospect for the demand for this black-commodity in future. Nonetheless, due to the uncertainty with regards of the coronavirus outlook, investors would continue to focus ongoing news in term of vaccine development in order to gauge the likelihood movement for the commodity.

 

Weekly Outlook: Aug 17 – 21

For the week ahead, investors would have to scrutinize the latest developments with regards of the outbreak of the coronavirus, trade tensions between U.S. and China and also crucial economic data such as US Existing Home Sales in order to receive further trading signals.

 

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: August 17 – 21

Time Market Event Actual Expectation Previous
Monday – 17th August 2020
N/A
Tuesday –18th August 2020
09:30 AUD RBA Meeting Minutes
20:30 USD Building Permits (Jul) 1.313M 1.258M
Wednesday – 19th August 2020
04:30 CrudeOIL API Weekly Crude Oil Stock -4.400M
14:00 GBP CPI (YoY) (Jul) 0.6% 0.6%
17:00 EUR CPI (YoY) (Jul) 0.4% 0.4%
20:30 CAD Core CPI (MoM) (Jul) 0.4%
22:30 CrudeOIL                 Crude Oil Inventories -4.512M
Thursday – 20th August 2020
02:00 USD FOMC Meeting Minutes
19:30 EUR ECB Publishes Account of Monetary Policy Meeting
20:30 USD Initial Jobless Claims 893K 963K
20:30 USD Philadelphia Fed Manufacturing Index (Aug) 20.5 24.1
Friday – 21st August 2020
14:00 GBP Retail Sales (MoM) (Jul) 2.3% 13.9%
15:30 EUR German Manufacturing PMI (Aug) 52.5 51.0
16:30 GBP Composite PMI 57.0
16:30 GBP Manufacturing PMI 55.3
16:30 GBP Services PMI 56.5
20:30 CAD Core Retail Sales (MoM) (Jun) 15.0% 10.6%
22:00 USD Existing Home Sales (Jul) 5.39M 4.72M