25 May 2020               Weekly Analysis

 

GCMAsia Weekly Report: May 25 – 29

Market Review (Forex): May 18 – 22

US Dollar

The dollar index which traded against a basket of six major currency pairs have managed to stay afloat on last Friday after a sell-off on the first half of the previous week while ending the session with the price of 99.75. The weekly jobless claims data and FOMC minutes were the main area of focus among investors.

 

In overall, the greenback suffered losses in overall. From data perspective, jobless claims data in the week came in higher with the reading of 2.438M against forecast of 2.400M. The U.S housing sector also deteriorated drastically with existing new homes sales slumped by 17.8% compared to previous month of -8.5%.  Meanwhile, Fed Chairman Jerome Powell also could not provide any boost for the dollar. Despite Fed Chairman Jerome Powell stated that there is still more ammunition to support the economy, he expected that U.S economic recovery will be slow. On top of that, escalating tension between the U.S and China also exert pressure in the greenback. In the week, the House of Representatives have passed a Bill to oust and ban Chinese companies from U.S exchanges and China threatens to retaliate. Regarding to coronavirus in the U.S, the total number of cases rose by 163,260 to 1,645,094.

 

Due to the increasing tension between the two world’s biggest economic powerhouses, it is expected the greenback will continue to be challenged by uncertainty between U.S and China and also with the ongoing coronavirus while market focus on further development to gauge the sentiment for the week ahead.

 

USD/JPY

The pair of USD/JPY rose in overall last week while ending last Friday session at the price of 107.61. Due to various disappointing data, the Japanese Yen failed to find support. Exports tumbled by 21.9% and imports also in decline. Private sector PMIs delivered little confidence on Thursday, with manufacturing sector activity contracting at a faster pace with the reading of 38.4 against previous month of 41.9. On top of that, Japan National CPI also fell to 0.1%, weaker than previous reading of 0.0%.

 

EUR/USD

Pair of EUR/USD have rose throughout the first half of week, however gave up some of its gains on last Friday while ending session at the price of 1.0901. In the first half, the proposal of recovery fund from France and Germany have assist the Euro in attracting bid from the market. However, the momentum was unable to maintain and short-lived. From the ECB, the monetary policy meeting minutes had a muted impact. There were no surprises, with the minutes continuing to call for fiscal support from member states.

 

GBP/USD

The pair of GBP/USD have tumbled throughout the previous week while closing its market at 1.2163. British five-year government bond yields fell below zero for the first time after Britain sold its first government bond with a negative yield. Speculation of negative rates also worsen the confidence further towards the pair where BoE stated that plans of negative interest rates are ‘in consideration for first time. Furthermore, the lack of progress in Brexit talk also exert ongoing pressure for the pair.

 

Market Review (Commodities): May 18 – 22

GOLD

Gold price remains stable throughout the week, however still ending the week at a loss with the price of $1734.22 a troy ounce. Following the escalating tension between the U.S and China, the demand for safe haven commodity remains supported. Last week, China plans to implement a controversial national security laws in Hong Kong that caused a number of small-scale protests took place in Hong Kong. Thus, Investors turned to the safe-haven yellow metal for risk aversion.

 

CrudeOIL

The price of crude oil remains solid throughout the week while closing last Friday session with the price of $33.37 per barrel as the market continue to react positively in overall towards the recovery in demand and easing supply glut.

 

On data front, the Energy Information Administration (EIA) on Wednesday reported an oil inventory draw of 5 million barrels for the week to May 15. Stockpiles had dropped by 700,000 barrels in the the week. US oil rigs also decline for the 10th consecutive week as the number of active rigs drilling for oil in the United States have fell by 21 in the week of May 22 to a record low of 318. Rebound in fuel usage also help attracting buyers for the black commodity. According to recent reports, some airlines such as British airline easyJet plans to restart some flights on June 15, hinting to higher jet fuel demand. On top of that, the commodity was also supported by ongoing production cuts from OPEC and its allies.

 

Although the outlook for the commodity remains positive, the increasing tension between U.S and China could limit the potential gains and turning the momentum upside down for the weak ahead. Investors will now focus on attain further signal to determine the direction for the commodity.

 

Weekly Outlook: May 25 – 29

For the week ahead, investors would continue to focus on the latest developments between the U.S and China and also important economic data such as Jobless Claims and GDP to determine further direction. Besides that, the ongoing situation of coronavirus in the U.S 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: May 25 – 29

Time Market Event Actual Forecast Previous
Monday – 25 May 2020
14.00 EUR German GDP (QoQ) (Q1) -2.2% -2.2%
16.00 EUR German Ifo Business Climate Index (May) 78.3 74.3
Tuesday – 26 May 2020
22.00 USD CB Consumer Confidence (May) 88.0 86.9
22.00 USD New Home Sales (Apr) 490K 627K
Thursday – 28 May 2020
20.30 USD Core Durable Goods Orders (MoM) (Apr) -14.0% -0.6%
20.30 USD GDP (QoQ) (Q1) -4.8% -4.8%
20.30 USD Initial Jobless Claims 2100K 2438K
20.30 USD Pending Home Sales (MoM) (Apr) -15.0% -20.8%
23.00 CrudeOIL Crude Oil Inventories -4.983M
Friday – 29 May 2020
17.00 EUR CPI (YoY) (May) 0.1% 0.3%
20.30 CAD GDP (MoM) (Mar) -9.0% 0.0%