23 March 2020 Weekly Analysis
GCMAsia Weekly Report: March 23 – 28
Market Review (Forex): March 16 – 21
US Dollar
The dollar index which measure its value against a basket of six major currency surged in last week following a continually declines in global stock markets and worries upon the coronavirus had been prompting the investors to shift their portfolio toward high liquidity items such as US Dollar in order to prevent liquidity and solvency risk within the company, while closing its market at the price of 102.00.
On last week, the Federal Reserve slashed its interest rates to zero and launched a new bond purchase programmed. Nonetheless, such policy still failed to boost up the economic progression in the United Stated. On last week, all three of major U.S. stock market indices plummeted more than 15%, triggering the circuit breaker within just a few minutes. Such sentiment had prompted the investors to sell-off their less liquidity products such as gold, silver and cryptocurrency in return for the cash in order to prevent margin call from the bank, which further insinuating further demand for the US Dollar. Indeed, on last Thursday, the Senate Majority Leader Mitch McConnell claimed that US Federal Reserve would release a massive economic stimulus bill with roughly around $1.3 trillion by direct cash payments to many Americans for fighting the coronavirus’s fallout. However, the stimulus bill was rejected by the Democrats on yesterday as they think that the motions deems to be revised, putting the vote results into 47 against 47. Nonetheless, the US President Donald Trump believe that the lawmakers would reach a deal somehow.
On the coronavirus epidemic front, as for now the US coronavirus cases had increased to 32,000 and at least 400 people died in the United Stated on Sunday. The Republican U.S. Senator Rand Paul of Kentucky on Sunday became the first member of the Senate to announce that he had tested positive for the coronavirus. Millions of people within the United States have been ordered by their governors to stay home. Nonetheless, the Businesses deemed as essential services will be allowed to open. U.S President Donald Trump said on Sunday that the National Guard would help New York, California and Washington state response to the coronavirus crisis. The St. Louis Federal Reserve President James Bullard claimed that the coronavirus crisis would be prompting the second quarter of GDP from the U.S. region to shrink by 50% and the surge in unemployment to 30%. Nevertheless, at this time, investors would continue to scrutinize the latest updates with regards of the coronavirus, monetary and fiscal tool which implemented by the U.S. Central Bank, and also the stock market performance in the United Stated in order to gauge the further 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 110.85. The overall bullish momentum for the pair was mostly prompting by the strengthen in US Dollar. On last week, the US Dollar surged as the investors sell-off others portfolio and change to US Dollar in order to support the crash of stock market in the United Stated. However, the Japanese Yen received bullish momentum in today early trading session amid broad risk-aversion following the U.S. Senate fail to approve the coronavirus economic relief package.
EUR/USD
Pair of EUR/USD slumped last week while closing last Friday’s trading session with the price of 1.1065. The overall bearish momentum for the pair was mostly due to the strengthen in the rival currencies, especially in U.S dollar. Besides that, the worsening scenario of the coronavirus in the Europe region had further spurred significant sell off on the pair. According to Aljazeera, the death toll from the coronavirus pandemic continued its relentless rise in Europe on Sunday with Italy announcing 651 people was dead due to the coronavirus, bringing its total to 5,476 people. As for now, Italy’s health ministry approved new measures to limit people’s movement to prevent the worst coronavirus outbreak in Europe. Nonetheless, the losses experienced by the pair was limited following the European Central Bank announced a 750-billion-euro asset-purchase program on last Wednesday to offset the damage of the coronavirus. The European Central Bank claimed that the new program which targeting on public and private sector assets will be implemented until the end of 2020.
GBP/USD
The pair of GBP/USD was traded lower throughout the entire week while closing its market at 1.1584. The Pound sterling plunged on last week as investors snap up the US dollar. The fears upon the coronavirus and the uncertainty of post-Brexit agreement had intensified the risk-off sentiment in the UK market, which prompting the investors to shift the risky asset such as the Pound Sterling toward the other safe-haven asset such as US Dollar. However, the Pound Sterling rebounded from its lowest level following the Bank of England decrease its interest rates to 0.1% and implement its bond-buying program on last Thursday in order to relief the economic damage from the coronavirus as investors expected that such policy would able to enhance the economic progression in the UK. Besides that, the British government bond yields also rallied on last Thursday following the Bank of England stimulus plans, which spurring further demand on the Pound Sterling. On Wednesday, the UK government ordered all schools to close while forcing people to work from home following the number of confirmed coronavirus cases rose 48% from the previous day. Nonetheless, the investors will continue to scrutinize the latest moves on the fiscal and monetary policy from the Bank of England.
Market Review (Commodities): March 16 – 21
GOLD
Gold price was traded lower while closing its market on Friday at $1498.47 per troy ounce. Earlier last week, the gold price was traded higher following the Federal Reserve announced that they would reduce its interest rates into zero and buy at least $700 billion in government and mortgage-related bonds as part of emergency action to protect the economy from the negative impact of the coronavirus outbreak. Such heavy-handed central bank actions accelerated the concerns that the economy might be in worse shape than even many experts thought, which diminishing the risk appetite in the market while increasing demand for the safe-haven commodity. However, the gold market plummeted following the US stock market slumped more than 15% for last week, which triggering investors to sell-off their less liquid commodity into cash in order to prevent margin calls from the commercial bank.
CrudeOIL
The crude oil price was traded lower while closing last week market session with $23.73 per barrel. The oil price was traded lower as investors fears that the outbreak of the coronavirus could jeopardize the global economy growth, while spurring negative perspective for the oil demand in the future.
According to Reuters, the coronavirus has infected more than 325,000 people and killed over 14,000 people in worldwide. The escalated lock-down policy from the global government in order to curb the spread of the virus outbreak had disrupted business, travel and daily life. Besides that, the crude oil market received further bearish momentum as the risk upon the price war between Russia and Saudi Arabia intensified. According to CNBC, Saudi Arabia has announced plans to increase its daily production to 12.3 million barrels per day.
However, the losses experienced by the crude oil was limited following the US President Donald Trump claimed that he could intervene in an oil-price war between Russia and Saudi Arabia on last Friday. Besides that, according to Energy Information of Administration, U.S. Crude Oil Inventories notched down from the previous reading of 7.664M to 1.954M, lower than the economist forecast at 3.256M. Nonetheless, the investors would remain fixated upon the ongoing headlines of the coronavirus as well as the development of price war in between Saudi Arabia and Russia in order to receive further trading signals
Weekly Outlook: March 23 – 28
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 economic data such as GDP from the US region and the UK CPI Index in order to gauge the currencies movement.
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: March 23 – 28
| Time | Market | Event | Actual | Forecast | Previous |
| Monday – 23hb Mac 2020 | |||||
| 20:30 | CAD | Wholesale Sales (MoM) (Jan) | – | -0.2% | 0.9% |
| Tuesday – 24hb Mac 2020 | |||||
| 16:30 | EUR | German Manufacturing PMI (Mar) | – | 40.0 | 48.0 |
| 17:30 | GBP | Composite PMI | – | – | 53.0 |
| 17:30 | GBP | Manufacturing PMI | – | – | 51.7 |
| 17:30 | GBP | Services PMI | – | – | 53.2 |
| 22:00 | USD | New Home Sales (Feb) | – | 750K | 764K |
| Wednesday – 25hb Mac 2020 | |||||
| 17:00 | EUR | German Ifo Business Climate Indeks (Mar) | – | 87.5 | 96.0 |
| 17:30 | GBP | CPI (YoY) (Feb) | – | 1.6% | 1.8% |
| 20:30 | USD | Core Durable Goods Orders (MoM) (Feb) | – | -0.3% | 0.8% |
| 22:30 | CrudeOIL | Crude Oil Inventories | – | – | 1.954M |
| Thursday –26hb Mac 2020 | |||||
| 17:30 | GBP | Retail Sales (MoM) (Feb) | – | 0.2% | 0.9% |
| 20:00 | GBP | BoE Interest Rate Decision (Mar) | – | – | 0.10% |
| 20:00 | GBP | BoE MPC Meeting Minutes | – | – | – |
| 20:30 | USD | GDP (QoQ) (Q4) | – | 2.1% | 2.1% |
| 20:30 | USD | Initial Jobless Claims | – | 750K | 281K |
| Friday– 27hb Mac 2020 | |||||
| 20:30 | USD | Core PCE Price Indeks (Mom) (Feb) | – | 0.2% | 0.1% |
| 20:30 | USD | Personal Spending (MoM) (Feb) | – | 0.2% | 0.2% |
| 22:00 | USD | Michigan Consumer Sentiment (Mar) | – | 90.0 | 95.9 |
| 01:00
（28hb） |
CrudeOIL | U.S. Baker Hughes Oil Rig Count | – | – | 664 |