26 October 2020                    Weekly Analysis

 

GCMAsia Weekly Report: October 26 – 30

 

Market Review (Forex): October 19 – 23

US Dollar

The dollar index which traded against a basket of six major currency pairs failed to recoup its losses last week, yet it hit the lowest level in seven weeks amid heightening of hopes over passing a stimulus aid before US Presidential Election.

 

Earlier last week, dollar index turned scented while receiving huge bullish momentum after House of Speaker Nancy Pelosi revealed that she was still optimistic toward the stimulus plan can be unveiled by early next month. In the latest round of talk, White House and Congressional Democrats claimed enough progress in the talks regarding to the new stimulus aid plan, while the Deputy Chief of Staff Drew Hammill have also said that both parties were ‘serious’ to seal a plan. However, the gains were limited as the stimulus package drags on and on while the American are still waiting for further financial assistance from government in order to relief their business and living burden. As the impasses between Democrats and Republican still have not been breakthrough now, it is highly and unlikely a stimulus plan can be legally passed through Congress and Senate level within a short time frame.

 

With the combination of uncertainty in stimulus and the upcoming election, investors are expected to continue focus on the development of talks between Democrats and Republican over the stimulus plan, while eyeing on the upcoming relevant economic data.

 

USD/JPY

The pair of USD/JPY dropped significantly while ending last Friday session at the price of 105.31. The main contribution of bearish momentum on this currency pair were totally from the weakening of US dollar which under the background of high possibility of stimulus plan could be unveiled by early next month. Besides, upbeat economic data from Japan further dragged the currency pair to a lower level later in the week. According to the Statistics Bureau, Japan National Core CPI came in at -0.3%, slightly higher than the economist forecast and previous reading at -0.4%, reflecting that the negative impact of Covid-19 toward Japan has diminished gradually.

 

EUR/USD

The pair of EUR/USD rose throughout the week while ending last week session at the price of 1.1860 amid a series of upbeat data was released in Eurozone. According to Markit Economics, German Manufacturing PMI came in at 58.0, higher than the economist forecast at 55.1, showing that economy has started to recover from the fallout of pandemic. Moreover, German PPI data was also released with an optimistic reading at 0.4%, far better than the economist forecast at -0.1%. Despite, the recent resurgence of pandemic across the entire Eurozone have lifted up the market anxiousness, another round of ‘hammer’ hit on the EU economy might further threaten the recovery pace of economy in long run.

 

GBP/USD

The pair of GBP/USD have surged throughout the previous week while ending its market at 1.3040. As of now, the direction of pound sterling is still mainly driven by the development of Brexit. Last week, uncertainty over the Post-Brexit trade talks exerted huge volatility in pound market. Boris Johnson call on UK to prepare for Australian style deal, which symbolizing the UK will leave with no trade deal in place after the deadline of 15th October, while no trade deal was being successfully reached between two countries as of now. Moreover, European Union was also refused to discuss about legal texts while the major issue such as fisheries and level playing field are remained unsolved as of now. High possibility of Hard-Brexit limited the gains of GBP/USD despite the dollar plunged tremendously last week.

 

Market Review (Commodities): October 19- 23

GOLD

Gold price was remained stable throughout the week, however still ending the week at a gain with the price of $1901.50 a troy ounce following the optimism over the stimulus aid in US and uncertainty of Brexit. Last week, gold price received some bullish momentum as the hopes of stimulus aid ignited after US President Donald Trump agreed to increase the amount of stimulus aid to a higher level in order to feed the appetite of Democrats. Besides, House speaker Nancy Pelosi also revealed that she is optimistic toward a stimulus deal could be secured by the end of this month. On the other sides, back and forth in Post-Brexit talks has also further urged the investor to shift their capital into safe haven asset in order to stay away from uncertainty.

 

CrudeOIL

The price of crude oil plunged throughout the week while closing last Friday session with the price of $39.69 per barrel amid surging of Covid-19 around the globe and ceasefire in Libya.

 

Last week, crude oil price remained traded in a lower level as US crude oil inventories data showed a higher-than-expected reading. According to the EIA, US Crude Oil Inventories in last week has only drew by -1.001M, missing the economist forecast at -1.021M. However, the fears of resurgence of Covid-19 around the globe continues driven the oil prices further downward. On Friday, the US reported more than 80k new confirmed cases per day for the first time in three months, while the trajectory suggest the number will further move upward in the coming days. The recovery of oil demand has faded while this black commodity market sentiment is now even pessimistic than before. Last but not least, markets are now expecting more Libyan oil will return to market as faction sign ceasefire. The ceasefire is poised to lead to more Libyan oil supply to the market at a time when demand is weak under the pandemic impact.

 

Although the outlook for the commodity remains negative while no signs of strong recovery, Investors will continue to focus on inventories data and the development of pandemic to determine the direction for the commodity.

 

Weekly Outlook: October 26 – 30

For the week ahead, investors would continue to focus on the ongoing developments on U.S stimulus and economic data such as GDP 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: October 26 – 30

 

Time Market Event Actual Forecast Previous
Monday – 26th October 2020
17:00 EUR German Ifo Business Climate Index (Oct) 93.0 93.4
22:00 USD New Home Sales (Sep) 1,025K 1,011K
Tuesday – 27th Oktober 2020
20:30 USD Core Durable Goods ORders (MoM) (Sep) 0.4% 0.6%
20:30 USD CB Consumer Confidence (Oct) 102.5 101.8
Wednesday – 28th October 2020
08:30 AUD CPI (QoQ) (Q3) .15% -1.9%
22:00 CAD BoC Interest Rate Decision 0.25% 0.25%
22:30 USD Crude Oil Inventories -1.001M
23:15 CAD BoC Press Conference
Thursday – 29th October 2020
Tentative JPY BoJ Monetary Policy Statement
Tentative JPY BoJ Outlook Report
Tentative JPY BoJ Press Conference
16:55 EUR German Unemployment Change (Oct) -5K -8K
20:30 USD GDP (QoQ) (Q3) 31.9% -31.5%
20:30 USD Initial Jobless Claims
20:45 EUR ECB Interest Rate Decision 0.00%
21:30 EUR ECB Press Conference
22:00 USD Pending Home Sales (MoM) (Sep) 4.5$ 8.8%
Friday – 30th October 2020
15:00 EUR German GDP (QoQ) (Q3) 7.2% -9.7%
18:00 EUR CPI (YoY) (Oct) -0.3% -0.3%
20:30 CAD GDP (MoM) (Aug) 0.9% 3.0%