28 September 2020                Weekly Analysis

GCMAsia Weekly Report: September 28 – October 2

Market Review (Forex): September 21 – 26

US Dollar

The dollar index which traded against a basket of six major currency pairs surged last week following top Federal Reserve official unleashed a hawkish tone by mentioning the prospect of increasing the interest rates in future, which dialed up the market optimism toward the economic progression in the United States. Besides, the rising coronavirus cases in the world and also weak economic data from the Europe region had also spurred risk-off sentiment in the FX market while prompting investors to shift their portfolio toward the safe-haven Dollar. The Dollar index was closing its price on last Friday session at the price of 94.66.

 

According to Reuters, the Federal Reserve Chairman Jerome Powell told a congressional panel on Tuesday that the U.S. economy has shown unmarkable improvement since the coronavirus pandemic drove it into recession, though he also reiterated that the path ahead remains uncertain while the U.S. central bank will do more if needed in order to boost up the economic recovery pace. In addition, Chicago Fed President Charles Evans said the Fed could start raising interest rates before the U.S. economy reach its target averaging inflation rates at 2%. In fact, he claimed that aggressive quantitative easing may not provide another lift to the U.S. economy. Besides, the spiking numbers of coronavirus infections from the European region had been forcing parts of Europe imposed restrictions, which spurring negative prospect for the Europe economy while prompting investors to shift their portfolio toward the safe-haven US Dollar.

 

On the economic data front, most of the economic data were came in at dismal reading, despite some of the results were fared better than market expectation. According to the Department of Labor, the U.S. Initial Jobless claims notched up from the preliminary reading of 866K to 870K, worse than the market forecast at 840K while signaling that the economic recovery was still running out of steam in the United States. Similarly, the U.S. Core Durable Goods orders for last month came in at only 0.4%, which also worse than the market forecast at 1.2%. As both data fared worse than expectation, which spurring slightly selloff for the US Dollar on last week. Nonetheless, the overall momentum for the US Dollar remained strong over the backdrop of positive housing data on last week. Census Bureau reported that the U.S. New Home Sales notched up significantly from the previous reading of 965K to 1,011K, fared better than the market forecast at 895K. As for now, investors would continue to scrutinize the latest updates with regards of the economic stimulus plan that will be voted in this week in order to gauge the likelihood movement for the currency.

 

USD/JPY

Pair of USD/JPY was traded higher last week while ending last Friday session at the price of 105.58. The overall bullish momentum for the pair was mainly due to the appreciation of the US Dollar.  As for now, the Japanese Prime Minister (PMI) Yoshihide Suga said that the Japan’s government will continue to support the economic recovery from the coronavirus crisis. Nonetheless, the market demand for the safe-haven Japanese Yen remained strong following the Bank of Japan (BOJ) Governor Haruhiko Kuroda said that the tension in financial and capital markets due to the coronavirus outbreak has eased, which dialed up the market optimism toward the economic progression in the Japan region.

 

EUR/USD

Pair of EUR/USD slumped on last week while closing last Friday’s trading session with the price of 1.1616. The overall bearish momentum of the pair was mostly due to the weakening in the rival currencies, especially in US Dollar. Besides, the Euro extend its losses amid the resurgence of new coronavirus cases from the Europe region. Spiking numbers of the coronavirus infections had prompted the European policymakers to impose restrictions on some of the economic sector, which triggering worries on the economic recovery progression from the Europe region. Nonetheless, the losses experienced by the Euro was limited over the backdrop of the upbeat economic data. According to Markits Economics, the Germany Manufacturing Purchasing Managers Index (PMI) came in at 56.6, better than the market forecast at 52.5.

 

GBP/USD

The pair of GBP/USD slumped on last week while closing its market at 1.2742. The Pound Sterling suffered from significant selloff on last week amid uncertainty upon the Brexit issues, spiking numbers of the coronavirus from UK and also dovish tone from the Bank of England. According to Reuters, Bank of England governor Andrew did not exclude the possibility of negative interest rates, while reiterated that the BoE is still seeking for the appropriate monetary tool to boost up the economic progression in the UK. Besides, the outlook for sterling remains bleak as looming risk of a no-deal Brexit and new lockdown measures had weighed down the currency. Earlier this week, the Prime Minister Boris Johnson told people to work from home where possible and ordered restaurants and bars to close early.

 

Market Review (Commodities): September 21 – 26

GOLD

Gold price was traded lower in overall last week while closing its market on Friday at $1861.10 per troy ounce. The safe-haven gold posted its steepest contraction since August in last week as a rising U.S. Dollar had dampened foreign demand for the dollar-denominated asset, however the losses experienced by the gold commodity was limited late in the week as hopes for more U.S. stimulus measures resurfaced. In earlier, the next coronavirus response bill remained deadlocked while market participants expected a smaller chance of the aggressive economic stimulus plan in future. Nonetheless, investors would continue to scrutinize the latest updates with regards of another coronavirus stimulus plan which would be voted on the legislation this week in order to gauge the likelihood movement for the commodity.

 

CrudeOIL

The crude oil price slumped on last week while closing last Friday session with $40.05 per barrels. The oil market was traded lower over the backdrop of the negative inventory data on last Wednesday. According to the Energy Information Administration, The U.S. Crude Oil Inventories came in at -1.639M, worse than the market forecast at -2.325M. Besides, the spiking numbers of the coronavirus cases in major U.S. states as well as the other region, had renewed fears of mobility restrictions while affecting the ongoing oil demand recovery in the future.  Nonetheless, the coronavirus vaccine development remained as a crucial catalyst for the oil market in future. Hence, investors would continue to eye on the latest vaccine development in order to receive further trading signal.

 

Weekly Outlook: September 28 – October 2

For the week ahead, investors would have to scrutinize the latest developments with regards of the outbreak of the coronavirus, trade tensions between U.S. and China and also crucial economic data such as US GDP in order to receive further trading signals.

 

As for oil traders, they will be eyeing on US inventories level reported by API and EIA as well as coronavirus vaccine development to gauge the strength of crude demand for world’s largest oil consumer.

 

Highlighted economy data and events for the week: September 28 – October 2

Time Market Event Actual Forecast Previous
Monday – 28th September 2020
21:45 EUR ECB President Lagarde Speaks
Tuesday –29th September 2020
22:00 USD CB Consumer Confidence (Sep) 89.2 84.8
Wednesday – 30th September 2020
04:30 CrudeOIL API Weekly Crude Oil Stock 0.691M
09:30 CNY Manufacturing PMI 51.2 51.0
09:30 CNY Caixin Manufacturing PMI (Sep) 53.1 53.1
14:00 GBP GDP (QoQ) (Q2) -20.4% -20.4%
15:30 EUR ECB President Lagarde Speaks
17:00 EUR CPI (YoY) (Sep) -0.2% -0.2%
20:15 USD ADP Nonfarm Employment Change (Sep) 605K 428K
20:30 USD GDP (QoQ) (Q2) -31.7% -31.7%
20:30 CAD GDP (MoM) (Jul) 3.0% 6.5%
22:00 USD Pending Home Sales (MoM) (Aug) 3.2% 5.9%
22:30 CrudeOIL                 Crude Oil Inventories -2.325M -1.693M
Thursday – 1st October 2020
07:50 JPY Tankan Large Manufacturers Index (Q3) -23 -34
07:50 JPY Tankan Large Non-Manufacturers Index (Q3) -9 -17
15:55 EUR German Manufacturing PMI (Sep) 56.6 56.6
16:30 GBP Manufacturing PMI (Sep) 54.3 54.3
18:00 EUR EU Leaders Summit
20:30 USD Initial Jobless Claims 850K 870K
22:00 USD ISM Manufacturing PMI (Sep) 56.2 56.0
Friday– 2nd October 2020
09:30 AUD Retail Sales (MoM) (Aug) -4.2% 3.2%
17:00 EUR CPI (YoY) (Sep) -0.1% -0.2%
20:30 USD Nonfarm Payrolls (Sep) 850K 1.371K
20:30 USD Unemployment Rate (Sep) 8.2% 8.4%