21 September 2020              Weekly Analysis

 

GCMAsia Weekly Report: September 21 – 25

Market Review (Forex): September 14 – September 18

 

US Dollar

Dollar index which gauges its value against a basket of six major currencies was having mixed pattern last week while closing its last friday trading session near 93.00 amid heightening tensions between US and China while a hawkish statement was given by the Federal Reserve.

 

Earlier last week, dollar index managed to gain some bullish momentum which was generated by the Federal Reserve hawkish-bias. In the two days meeting, Federal Reserve concluded that they will continue to pledge the interest rate at rock bottom level between 0.00% to 0.25% while emphasizing that the interest rate may probably remain at this low level  for years until a strong recovery in the US economy happens. However, Fed Chairman mentioned in the press conference that they are seeing some improvement in certain areas, hence they adjusted the drop in GDP forecast downward and expect a lower unemployment rate in 2020. At the same time, Jerome Powell also warned that US monetary policy will remain highly accommodative as the pandemic is still haunting the economy, despite a little recovery can be seen as of now. US government should maintain their pace of aid toward the economy while the Federal Reserve promised that their asset purchase program will be continued at least at its current pace.

 

On the other side, the exacerbating tensions between the US and China has limited the gains of the dollar index in the later part of last week. Recently, WTO revealed that the additional tariff imposed in year 2018 by the US on China goods has violated the international trading rules as the US failed to prove that the measures are provisionally justified.  However, the US side still maintains their hard stance on this issue while saying that they will continue to defend themselves against unfair trade practises from China. As of now, investors will continue to eye on the development of vaccines as well as tensions between US and China to gauge the further direction of dollar index.

 

USD/JPY

The pair of USD/JPY was traded lower throughout the week while ending last Friday’s session at the price of 104.55. The Japanese Yen gained huge bullish momentum after Bank of Japan Chairman Kuroda said that their economy is starting to pick up from the downturn while seeing their export and production have increased substantially. However, they will remain cautious toward the pandemic development while work closely with the local government in order to boost up the speed of economic recovery.

 

EUR/USD

The pair of EUR/USD was traded lower last week while closing last Friday’s trading session with the price of 1.1839. Last week, the euro currency received huge sell off pressure in the market amid US Federal Reserve hawkish statement and a resurgence of Covid-19 cases in Europe. According to the latest statistics, major countries in Europe recorded an obvious surge in the number of confirmed cases, while France’s health ministry reported the country’s highest number of COVID-19 infections for a single day since the coronavirus outbreak began. The resurgence of pandemic turned the appeal of euro market sour, as market worries the economy health will be hammered significantly again.

 

GBP/USD

The pair of GBP/USD was traded higher while closing its market at 1.2915. Last week, the market sentiment of pound sterling turned sweetened as a neutral stance from the Bank of England(BoE) lifted the appeal of the pound market. In the interest rate meeting, BoE decided to maintain its cash rate at 0.10% while open for further rate cut if necessary. However, investors are still keeping their eyes on the trade negotiation between the UK and EU as failure to secure a deal may jeopardize the economic outlook of both countries.

 

Market Review (Commodities): September 14 – September 18

GOLD

Gold price was traded higher throughout the entire last week while closing its market on Friday at $1949.25 per troy ounce. In overall, the appeal of this yellow metal remains scented and attracting as uncertainty around the world such as Brexit issue and tensions between US and China. Besides, the sign of resurgence of Covid-19 in Europe has also underpinned the market sentiment in gold market. Despite there being some development in the vaccines’s research, but experts revealed that a vaccine could be proved that it is 100% safe and immune to the virus at least by 2021. Therefore, investors will continue to eye on different geopolitical issues while paying attention to vaccines development as well.

 

CrudeOIL

The crude oil price rose significantly last week while closing last Friday’s session with $41.15 per barrel amid new tropical storms flared while a huge draw was shown in the recent data.

 

Recently, oil prices managed to extend its gains to a high level as more storms are incoming to the Gulf of Mexico, forcing oil companies to evacuate workers from the area to avoid accidents. Prior to now, the hurricane Sally slammed into Alabama, causing most of the oil drilling platforms in the Gulf of Mexico to remain offline. Therefore, investors are now paying attention to the new tropical storm called Beta as it might affect the oil drilling activity in the Gulf of Mexico. If the strength of Beta goes beyond 74 mph, it woul be the third Gulf of Mexico hurricane in less than a month.

 

On the data front, US crude oil inventories level showed a huge draw, smoothening  the market worries over the supply glut during the novel of pandemic. According to the API, US weekly Crude Oil Stock dropped by -9.517M, lower than the economist forecast at 2.049M barrel. Besides, EIA also recorded a fall  in US crude oil inventories level of -4.389M, lower than the economist forecast of -1.271M. Both upbeat inventories data were generally contributed by the storms in Gulf of Mexico, while eventually lifted up the appeal of this black commodity market. In near term, market believe that the oil price will continue its upward trend as tropical storms is drifting toward the Gulf of Mexico.

 

Meanwhile, market participants will continue to eye on the tropical hurricane to gauge the oil supply level as well as further development on potential coronavirus vaccines which may further determine the direction for the commodity.

 

 

Weekly Outlook: September 21 – 25

For the week ahead, investors would continue to eye on the latest developments with regards to the development of coronavirus, tensions between U.S. and China and crucial housing data  in order to gauge the direction of major currency – US dollar.

 

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: September 21 – 25

Time Market Event Actual Expectation Previous
Monday – 21th September 2020
22:00 USD Fed Chair Powell Speaks
Tuesday –22th September 2020
15:30 GBP BoE Gov Bailey Speaks
22:00 USD Existing Home Sales (Aug) 6.00M 5.86M
22:30 USD Fed Chair Powell Testifies
Wednesday – 23th September 2020
04:30 CrudeOIL API Weekly Crude Oil Stock -9.517M
10:00 NZD RBNZ Rate Statement
10:00 NZD RBNZ Interest Rate Decision 0.25% 0.25%
15:30 EUR German Manufacturing PMI (Sep) 52.5 52.2
16:30 GBP Manufacturing PMI 55.2
16:30 GBP Services PMI 58.8
22:30 CrudeOIL                 Crude Oil Inventories -4.389M
Thursday – 24th September 2020
15:30 CHF SNB Interest Rate Decision -0.75%
15:30 CHF SNB Monetary Policy Assessment
16:00 EUR German Ifo Business Climate Index (Sep) 93.8 92.6
20:30 USD Initial Jobless Claims 845K 860K
22:00 GBP BoE Gov Bailey Speaks
22:00 USD New Home Sales (Aug) 900K 901K
Friday – 25th September 2020
20:30 USD Core Durable Goods Orders (Aug) 1.3% 2.6%