20 April 2020              Weekly Analysis

GCMAsia Weekly Report: April 20 – 25

Market Review (Forex): April 13 – 18

US Dollar

The dollar index which traded against a basket of six major currency pairs surged last week amid to risk-off sentiment as worsening economic fallout from the coronavirus outbreak, which stoked a shift in sentiment toward the safe-haven currency such as US dollar. The Dollar index was closing its price on last Friday session at the price of 100.21. Nonetheless, the gains experienced by the safe-haven dollar was limited over the backdrop of the negative economic data from the United States.

 

For last week, most of the data from United States were dominated by dismal prospect, despite some of the results were fared better than expectation. According to Census Bureau, U.S. Retail Sales for last month notched down from the preliminary reading of -0.4% to -8.7%, worse than the economist forecast at -8.0%. Similarly, the U.S. Philadelphia Fed Manufacturing Index declined from the previous reading of -12.7 to -56.6, missing the market forecast at -30.0, reported by the Federal Reserve Bank of Philadelphia while the U.S. Initial Jobless Claims came in at 5,245K, worse than the economist forecast as well. These bleak reading had dialed down the market optimism toward the economic progression in the United States, while diminish the demand for the US Dollar. However, according to the Census Bureau, the U.S. Building Permits came in at 1.353M, better than the economist forecast at 1.300M.

 

On the coronavirus epidemic front, the U.S. death toll from the novel coronavirus spike up to more than 40,000 people on last Sunday, the highest in the world and almost double the number of deaths in the next highest country Italy, according to Reuters. As for now, the United States has far by the world’s largest number of confirmed coronavirus cases, with more than 750,000 infections. New cases on last Saturday rose by nearly 29,000, the lowest increase in three days. Nonetheless, the U.S. President Donald Trump stated that he would speak with governors of all 50 states to open their economies in a timely manner by 1st May 2020. He reiterated that the daily fatalities in the United States from the coronavirus have fallen sharply, the U.S states are already making plans to get business open again. On top of that, U.S. Federal Reserve have also launched commercial paper funding facility program to help address liquidity issues which caused by the negative economic impacts from the coronavirus. As this time, investors would continue to scrutinize the latest updates with regards of coronavirus as well as the “reopening economies” decisions from the United States in order to receive further trading signal.

 

USD/JPY

Pair of USD/JPY was traded lower last week while ending last Friday session at the price of 107.52. The overall bearish momentum for the pair was mostly prompting by the diminishing of risk appetite in the FX market, prompting investors to shift their portfolio toward safe-haven asset such as Japanese Yen. The global confirmed cases of the coronavirus have now surpassed 2 million people. Despite that, the number of cases is slowing on a weekly basis. Besides, few of the countries such as Germany had released plans to get the economy started again. According to Reuters, for instances, German hairdressing salons will be allowed to reopen on 4th May if they take special steps to guarantee customers’ hygiene. “Reopening policy” would able to enhance the global economic momentum, while limited the appeal of the safe-haven Japanese Yen.

 

EUR/USD

Pair of EUR/USD slumped on last week while closing last Friday’s trading session with the price of 1.0872. The overall bearish momentum of the pair was mostly due to the strengthen in the rival currencies, especially in US Dollar.  Besides, the euro received further bearish momentum due to the lack of monetary and fiscal policy from the European policymakers to deal with the pandemic. Moreover, the euro slumped over the backdrop of the bleak data from the European region. According to Eurostate, the Eurozone Consumer Price Index (CPI) for last month declined from the previous reading of 1.2% to 0.7%.

 

GBP/USD

The pair of GBP/USD slumped on last week while closing its market at 1.2497. The Pound Sterling received bearish momentum following the U.K government claimed that it would extend its coronavirus lockdown for at least three more weeks. According to Reuters, Foreign Secretary Dominic Raab said the UK could not risk the process it had made in fighting the outbreak by easing up on restriction at this “delicate and dangerous stage”. Besides, he reiterated that there was no time frame for easing of restrictions as it would be irresponsible to give an indication of when the rules would change. On the Brexit front, the Brexit deal between the UK and European Union has taken a back seat since the health crisis started, raising speculation that the U.K. Prime Minister Boris Johnson may request for an extent its transition period, which had set on the end of December. Analysts predicted that the extension would provide a positive prospect for the Pound Sterling in future.

 

Market Review (Commodities): April 13 – 19

GOLD

Gold price was traded lower in overall last week while closing its market on Friday at $1674.35 a troy ounce. The gold price slumped on last week following the A.S. President Donald Trump announced a guideline to re-open his country’s economy on last week while the Gilead Sciences’ report that the efficacy of its experimental drug Remdesivir in treating coronavirus patient. According to the Stat, the superb medical-news website, reported that approximately 113 patients with severe cases of coronavirus who were treated with daily infusions of Remdesivir, most were discharged from the hospital in under a week. Nonetheless, the investors would continue to scrutinize the “reopening economics” decision from global policymakers as well as the development of the medicine for coronavirus in order to gauge the likelihood movement for the commodity.

 

CrudeOIL

The crude oil price received significant selloff on last week while closing last Friday session with $18.17 per barrels. The crude oil extended its weakness on last week due to the sliding demand of the crude oil and also concerns that the U.S. storage facilities will soon fill to the brim amid the coronavirus pandemic. According to Reuters, the oil market has been under pressure due to a spate of reports on weak fuel consumption and grim forecasts from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency. However, the OPEC and its allies such as Russia had agreed to reduce the oil output by 9.7 million bpd to stem a growing supply glut after the “lock-down” policy were implemented to curb the coronavirus pandemic. Besides, the Saudi Arabian officials have forecast that the total global supply cuts from oil producers could amount to nearly 20 million bpd. But that includes voluntary cuts from nations like the United States and Canada. However, the oil cut plan is seemingly insufficient in order to solve the demand shock problem in the oil market as analysts predicted that the world oil demand will decline by approximately 30% worldwide. With regards of inventories data, the Energy Information Administration reported that the U.S. Crude Oil inventories had increased significantly from the previous reading of 15.177M to 19.248M, exceeding the economist forecast at 11.676M. Nonetheless, investors would continue to eye on the further economic progression and the coronavirus outbreak to receive further trading signals.

 

Weekly Outlook: April 20 – 25

For the week ahead, investors would have to scrutinize the latest developments with regards of the outbreak of the coronavirus, economic stimulus from the global central bank, and crucial data such as U.S. Initial Jobless Claims and also Core Durable Goods Orders from United States 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: April 20 –  25

Time Market Event Actual Forecast Previous
Monday – 20th April 2020
N/A
Tuesday – 21st April 2020
09:30 AUD RBA Meeting Minutes
14:00 GBP Average Earnings Index +Bonus (Feb) 3.0% 3.1%
14:00 GBP Claimant Count Change (Mar) 175.0K 17.3K
17:00 EUR German ZEW Economic Sentiment (Apr) -41.0 -49.5
20:30 CAD Core Retail Sales (MoM) (Feb) 0.3% -0.1%
22:00 USD Existing Home Sales (Mar) 5.30M 5.77M
Wednesday – 22nd April 2020
14:00 GBP CPI (YoY) (Mar) 1.5% 1.7%
20:30 CAD Core CPI (MoM) (Mar) 0.7%
22:30 CrudeOIL Crude Oil Inventories 11.676M 19.248M
Thursday – 23rd April 2020
14:00 GBP Retail Sales (MoM) (Mar) -3.8% -0.3%
15:30 EUR German Manufacturing PMI (Apr) 39.0 45.4
16:30 GBP Composite PMI 36.0
16:30 GBP Manufacturing PMI 47.8
16:30 GBP Services PMI 34.5
20:30 USD Initial Jobless Claims 5,245K
22:00 USD New Home Sales (Mar) 645K 765K
Friday– 24th April 2020
14:00 GBP Retail Sales (MoM) (Mar) -4.0% -0.3%
16:00 EUR German Ifo Business Climate Index (Apr) 80.0 86.1
20:30 USD Core Durable Goods Orders (MoM) (Mar) -6.0% -0.6%
22:00 USD Michigan Consumer Sentiment (Apr) 68.0 89.1
01:00

(25hb)

CrudeOIL U.S. Baker Hughes Oil Rig Count 438