29 June 2020              Weekly Analysis

 

GCMAsia Weekly Report: June 29 – July 3

 

Market Review (Forex): June 22 – 26

US Dollar

the dollar index which measured its value against a basket of six major currency rivals have manage to held its ground throughout the week while ending the session at the price of 97.40. The market sentiment was experiencing a roller coaster ride following a major confusion triggered by White House advisor Navarro. On top of that, the daily Covid-19 updates also remained in focus among investors.

 

On earlier last week, White house trade advisor Peter Navarro have told Fox News in an interview that the trade deal between the U.S and China is over and linked the breakdown related to Washington’s anger over China for not sounding the alarm earlier about the coronavirus outbreak. The claims were made headlines and the market reaction was swift where investors have already expected a worsening outlook for the already fragile relationship. However, Peter Navarro have embarrassingly retracted his claims soon not long after he made the statement and emphasized that his statement was taken “out of context”. U.S President Donald Trump also emphasize that Navarro’s claim has been wrong and stated that the China trade deal remains intact. The confusion has triggered a volatile session in the earlier half of the week but the sentiment was steadied back not long after.

 

On the positive note, U.S key data have help buoyed the confidence. There was a less marked contraction in private sector which is aligned with the global trend. The service PMI rose from 37.5 to 46.7 in June. On top of that, core durable goods orders also rose by 4% while durable goods orders surged by 15.8%. Despite with disappointing jobless claims figures with an increase of 1.48m, the data was overshadowed by most positive data.

 

Still, as the coronavirus in the U.S remains deadly where the total Covid-19 cases rose to 2,547,876, the continuous upward trend of the coronavirus may limit the upside potential of greenback while market continues to monitor the development to gauge further sentiment.

 

USD/JPY

The pair of USD/JPY manage have retained most of its vale on Friday while ending last Friday session at the price of 107.21.  On data front, the service sector in Japan have witness an improvement with the PMI rising from 26.5 to 42.3. However, manufacturing sector PMI fell from 38.4 to 37.8, which triggered some mixed reaction. Still, Tokyo annual inflation rate held steady where the CPI which exclude fresh food remains at 0.2%. However, the stat has provided a muted reaction due to influence of market risk appetite.

 

EUR/USD

Pair of EUR/USD have rose during the first half of the week before giving up some of its gains while ending the trading session at the price of 1.1217. On data front, most of its stats were skewed to the positive with the data witness an improvement from the previous month. France manufacturing and service PMI rose above 50 while Germany and Eurozone also saw an increase in its numbers. Eurozone Composite PMI rose from 31.9 to 47.5 while Germany Business Climate rose from 85 to 86.2. However, due to the negative sentiment towards Covid-19 and U.S tariff threats, the upside potential has been limited.

 

GBP/USD

The pair of GBP/USD have been heavily sold by the market and fell while ending last week session at the price of 1.2331. With the increasing possibility of no-deal Brexit coupled with Covid-19 concerns, the sentiment was unable to be lifted even with impressive data. On data perspective, UK service sector jumped from 29.0 to 47.0 while manufacturing PMI also impressed with the reading of 50.1 which signaled the return of expansion. Despite with the positive data, the increasing uncertainty in Brexit and the potential second wave of coronavirus in the U.K continue to weigh heavily on the sentiment.

 

Market Review (Commodities): June 22 – 26

GOLD

Gold price continue to extend its rally in overall throughout the week while ending the week with the price of $1771.13 a troy ounce. The price of the safe-haven commodity continues to achieve new peaks as investors continue to diversify their portfolio on safe markets due to the ongoing condition of coronavirus. On top of that, tension between U.S with multiple countries such China and EU also added further reason for the market to increase their bets on risk-aversion assets. On global coronavirus front, the total number of coronavirus cases have reach to 9,884,193 on Friday. The total number was up by 1,126,459 on a global basis which is also higher that than the previous increase of 1,039,054 in new cases.

 

CrudeOIL

The price of crude oil continues to stand on high ground throughout the week while ending last week session at the price of $38.18 per barrel. Despite with Covid-19 concerns and increasing build, the optimism on recovery demand have overshadowed the negativity.

 

On data front, the American Petroleum Institute (API) reported an oil inventory draw of 1.749 million barrels against the expectation of a smaller build of only 299,000 barrels. To add further confirmation, the Energy Information Association also showed an increase of stockpiles by 1.442M for the week to June 19. However, market confidence towards the demand recovery remains solid which help keeping the commodity price afloat. According to satellite data, the volume of vehicle traffic in the US, Europe and Asia has started to intensify with the summer driving season. The OPEC+ output cut agreement also help providing further support for the black commodity. According to reports, OPEC and its allies were able to reach an overall compliance of 87% to its production cuts in May. On top of that, Russia have also slashed its flagship crude oil Ural to the lowest in at least 10 years which signaling the determination to work with its partners at OPEC+ to eliminate oil glut.

 

Still, due to the fears of second wave coronavirus, the upside potential for the black commodity remains uncertain in overall while market continue to focus on the development and supply level to determine further direction.

 

Weekly Outlook: June 29 – July 3

For the week ahead, investors would continue to eye on the U.S development and economic data such as Non-Farm Payrolls to determine further direction. On top of that, as U.S continue to battle with coronavirus, market will also be paying attention to the latest updates about the coronavirus.

 

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: June 29 – July 3

 

Time Market Event Actual Forecast Previous

Monday – 29 June 2020

22.00 USD Pending Home Sales (MoM) (May) 19.7% -21.8%

Tuesday – 30 June 2020

09.00 CNY Manufacturing PMI (Jun) 50.4 50.6
14.00 GBP GDP (YoY) (Q1) -1.6% -1.6%
14.00 GBP GDP (QoQ) (Q1) -2.0% -2.0%
17.00 EUR CPI (YoY) (Jun) 0.1% 0.1%
15.00 JPY BoJ Press Conference
20.30 CAD GDP (MoM) (Apr) -12.0% -7.2%
22.00 USD CB Consumer Confidence (Jun) 91.6 86.6

Wednesday – 1 July 2020

07.50 JPY Tankan Large Manufacturers Index (Q2) -31 -8
07.50 JPY Tankan Large Non-Manufacturers Index (Q2) -18 8
09.45 CNY Caixin Manufacturing PMI (Jun) 50.5 50.7
15.55 EUR German Manufacturing PMI (Jun) 44.6 44.6
15.55 EUR German Unemployment Change (Jun) 120K 238K
16.30 GBP Manufacturing PMI (Jun) 50.1 50.1
20.15 USD ADP Nonfarm Employment Change (Jun) 3000K -2760K
22.00 USD ISM Manufacturing PMI (Jun) 49.0 43.1
22.30 CrudeOIL Crude Oil Inventories 1.442M

Thursday – 2 July 2020

02.00 USD FOMC Meeting Minutes
20.30 USD Initial Jobless Claims 1350K 1480K
20.30 USD Nonfarm Payrolls (Jun) 3074K 2509K
20.30 USD Unemployment Rate (Jun) 12.3% 13.3%

Friday – 3 July 2020

09.30 AUD Retail Sales (MoM) (May) 16.3% -17.7%
14.00 GBP Composite PMI (Jun) 47.6 47.6
20.30 GBP Services PMI (Jun) 47.0 47.0