21 December 2020 Weekly Analysis
GCMAsia Weekly Report: December 21 – 25
Market Review (Forex): December 14 – 18
US Dollar
The dollar index which traded against a basket of six major currency pairs hovered near two-year lows on last week over the backdrop of dovish statement from the Federal Reserve as well as the positive hopes upon the massive U.S. government stimulus plan had dragged down the appeal for the US Dollar. The Dollar Index was closing its price on last Friday session at the price of 89.75.
According to the FOMC statement, the Federal Reserve claimed that they are committed to use its full range of monetary tools in order to boost up the U.S. economy while maximizing employment and price stability goals. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Besides, the Federal Reserve reiterated that they will maintain its accommodative stance of monetary policy while maintaining its interest rate for a reading up to 0.25% until the labor market and inflation condition have reached its goal. Besides, the Federal Reserve will extend its Quantitative Program in order to help foster smooth market functioning and accommodative financial conditions. Besides, investors also speculated that the U.S. lawmakers would able to agree on massive economic stimulus plan for amount up to $1.4 trillion in order to boost up the economic growth in United States. Such aggressive stimulus plan would trigger inflation risk in future, which dragged down appeal of the US Dollar.
As for now, investors would continue to scrutinize the latest updates with regards of the Covid-19 vaccine development, U.S. massive economic stimulus as well as further crucial economic data in order to gauge the likelihood movement for the US Dollar.
USD/JPY
The pair of USD/JPY received bearish momentum on last week while ending last Friday session at the price of 103.30. The overall bearish momentum for the pair was mainly due to the depreciation of the US Dollar. Besides, the uncertainty of the Brexit issues as well as the further “lock-down” restrictions from the UK and U.S. region had spurred risk-off sentiment in the FX market, which insinuating market demand on the safe-haven Japanese Yen.
EUR/USD
The pair of EUR/USD slumped throughout the week while ending last week session at the price of 1.2205. The Euro slumped over the uncertainty with regards of the Brexit issues, which undermining the market optimism toward the economic progression form the European Union while spurring selloff for the Euro. Nonetheless, the losses experienced by the Euro was limited over the backdrop of string of upbeat economic data from the European region. According to latest statistics, Germany Ifo Business Climate Index and Manufacturing Purchasing Managers Index (PMI) had came in at 92.1 and 58.6, which fared much better than the market expectation at 90.0 and 56.4 respectively.
GBP/USD
The pair of GBP/USD was edged lower on last week while closing its market price at 1.3520. Pound Sterling received significant bearish momentum on last week amid fears upon the hard-Brexit and also new Covid-19 restriction form the UK region. According to Reuters, the UK Prime Minister had announced to implement a new tier 4 restriction in certain area of UK amid the recent spike of Covid-19 infections. Under such restrictions, the capita of UK London, Southeast and East of UK are the area that being affected, non-essential shops, hairdressers, and entertainment venues must close, while only people who need to travel for education, childcare or to work are allowed. The decision has been finalized by Boris Johnson during the weekend as a curtailed plan for Christmas. Besides, lack of progress in Brexit talk between UK and EU had even exerted further pressure over the Pound Sterling. According to BBC, the UK government had revealed that there will be no post-Brexit trade deal unless there is substantial shift from EU in coming days.
Market Review (Commodities): December 14 – 18
GOLD
Gold price surged tremendously throughout last week with the price of $1879.05 a troy ounce amid the hopes upon the massive economic stimulus plan from the United States and also expansionary monetary policy from Fed had spurred higher probability of inflation risk in future, which insinuating the market demand for the safe-haven commodity. Higher inflation would normally tend to reduce the value of currency. Hence, when inflation remains high over a longer period, gold had become an effective tool in order to hedge against the inflationary condition.
CrudeOIL
The price of crude oil surged throughout the week while closing last Friday session with the price of $49.20 per barrel amid the positive Covid-19 vaccine development had spurred market optimism toward the crude oil demand in future. Besides, the crude oil price extends its gains over the backdrop of upbeat inventory data from EIA last week. According to Energy Information Administration (EIA), the U.S Crude Oil inventories had reduced significantly from the preliminary reading of 15.189M to -3.135M, much lesser than the market forecast at -1.937M. Nonetheless, the gains experienced by the crude oil price was limited following some region such as UK and US had imposed Covid-19 restrictions, which spurring negative prospect for the crude oil demand.
Weekly Outlook: December 21 – 25
For the week ahead, investors would continue to focus on crucial economic data such as U.S. Initial Jobless claims and also Brexit development in order to determine further direction. Besides that, the ongoing situation with coronavirus will also be in the eyes of investors.
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 21 – 25
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 21st December 2020 | |||||
| N/A | |||||
| Tuesday – 22rd December 2020 | |||||
| 08:30 | AUD | Retail Sales (MoM) | – | – | 1.4% |
| 17:30 | GBP | GDP (QoQ) (Q3) | – | 15.5% | 15.5% |
| 23:00 | USD | Existing Home Sales (Nov) | – | 6.7M | 6.85M |
| Wednesday – 23rd December 2020 | |||||
| 21:30 | CAD | GDP (MoM)(Oct) | – | 0.2% | 0.8% |
| 23:00 | USSD | New Home Sales (Nov) | – | 990K | 999K |
| 23:30 | USD | Crude Oil Inventories | – | -1.937M | -3.135M |
| Thursday – 24th December 2020 | |||||
| 21:30 | USD | Core Durable Goods Orders (MoM) (Nov) | – | 0.6% | 1.3% |
| 21:30 | USD | Initial Jobless Claims | – | 900K | 885K |
| Friday – 25th December 2020 | |||||
| N/A | |||||