30 March 2020                       Weekly Analysis

GCMAsia Weekly Report: March 30 – April 3

Market Review (Forex): March 23 – 27

US Dollar

The dollar index which traded against a basket of six major currency pairs have experience a tremendous sell-off last week, making it the biggest weekly decline since March 2009 while closing last Friday session at the price of 98.35, after U.S have become the leading position in confirmed cases of the coronavirus last and a new record of unemployment causing the greenback to fell further last week.

 

Last week, the U.S have become the country that have the most coronavirus cases in the world, surpassing Italy and China with the number of infections stands at 133094 while the number of death toll stands at 2363 on Sunday. There are also no signs of a slowdown in the number of cases. As the coronavirus have shut down a large part of U.S economy, a record of 3.3 million people filed claims for unemployment in the US last week which hinted that a full scale of unemployment crisis began to emerge. House of Representatives on Friday approved the latest $2.2 trillion aid package, the largest in American history will flood the world’s largest economy with money to stem the economic damage from the pandemic and to help people and businesses cope with the economic downturn inflicted by the coronavirus outbreak.  Besides that, the demand for dollar also weakens further after Federal Reserve expanded currency swap lines with central banks, ramped up cash offered to the repurchase-agreement markets and introduced a series of tools to unfreeze credit markets which have eased dollar funding market.

 

As the coronavirus virus continue to spread further and threaten global economy, investors would continue to focus on the latest updates with regards of the coronavirus, monetary and fiscal tools that are implemented by the Fed. Besides that, market will also concentrate on Wall Street performance and also treasury yield curve as an economic indicator for the greenback.

 

USD/JPY

Pair of USD/JPY was traded lower last week while ending last Friday session at the price of 107.93. The overall bearish momentum for the pair was mostly prompting by the weakness in US Dollar. Last week, the US Dollar plummeted following the easing of dollar funding pressure and the approval of 2.2 trillion stimulus. Besides that, worsening coronavirus also prompt investors to evade risky market and shifting their portfolio to safe-haven Yen.

 

EUR/USD

Pair of EUR/USD have outperformed and soared last week while closing last Friday’s trading session with the price of 1.1135 mostly due to the weakening sentiment in the rival currencies, especially in U.S dollar and bold measures from ECB. On last Thursday, ECB have given itself an unprecedented level of flexibility which almost all constraints that applied to the ECB’s previous asset-purchase programs have been removed or significantly loosened to buy an additional €750bn bonds in order to contain the financial fallout from the coronavirus pandemic.

 

GBP/USD

The pair of GBP/USD continue to gain throughout the entire week while closing its market at 1.2450. The Pound sterling jumped on last week after BoE has kept its interest rate at record low of 0.1% and express its commitment to do more.  BoE had ramped up its bond buying to purchase £200 billion extra in an attempt cushion the blow from the coronavirus hit to the economy. At the same time, BoE also stated that it stood ready to expand asset purchases further if necessary.

 

Market Review (Commodities): March 23 – 27

GOLD

Gold price was traded higher in overall last week while closing its market on Friday at $1629.34 a troy ounce as market turned risk-off mood and increased their bets on safe-haven assets following a combination of positive factors. Earlier last week, gold price was traded higher after U.S have surpassed China for the highest number of confirmed Covid-19 cases.  House of Representatives on Friday approved the latest $2.2 trillion aid package to stem the economic damage from the pandemic. The news has since diminished the risk appetite in the market while increasing the demand for the safe-haven commodity. Besides that, Fed Chairman Jerome Powell also stated the US central bank still has room for more action to combat coronavirus crisis and provided a modest lift to the yellow metal.

 

CrudeOIL

The crude oil price remains weak and fell in overall while closing last Friday session with $21.80 per barrel amid a combination of negative headlines and the ongoing concerns in demand due to coronavirus last week. Moreover, the sentiment for the black commodity have also diminished further after Trump failed to convince U.S Senate for funds to replenish the Strategic Petroleum Reserve (SPR).

 

After posting a modest recovery during the first half of the week, the commodity has once again dominated by sellers and drops nearly 5% as demand destruction caused by the coronavirus outweighed stimulus efforts by policymakers around the world. Following multiple lockdowns on various countries, global oil requirement is falling and the head of International Energy Agency (IEA) Fatih Birol, has called for major oil producers such as Saudi Arabia to help stabilize the oil markets last week. However, Saudi Arabia also struggling to find customers for its extra oil, undermining its bid to seize market share by expanding production. According to the statement from Russian Deputy Energy Minister Pavel Sorokin, the coronavirus outbreak has diminished global demand by 15 million to 20 million barrels per day.

 

Besides that, the U.S. Department of Energy is suspending its plans to buy crude for the country’s Strategic Petroleum Reserve after the requested $3 billion in funding for the project was left out of the $2 trillion stimulus package, causing the sentiment of the commodity to fell further. Oil price also get hit on the supply side by a price war between Saudi Arabia and Russia. Still, Investors would continue to focus on 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 30 – April 3

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 economic data such as Nonfarm Payrolls and Unemployment Rate to attain further confirmation.

 

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. Besides that, they will also focus on the headlines regarding price war between Saudi Arabia and Russia as well as the outbreak of coronavirus.

 

Highlighted economy data and events for the week: March 30 – April 3

Time Market Event Actual Forecast Previous
Monday – 30th March 2020
22.00 USD Pending Home Sales (MoM) (Feb) -1.0% 5.2%
Tuesday – 31th March 2020
09.00 CNY Manufacturing PMI (Mar) 45.0 35.7
14.00 GBP GDP (QoQ) (Q4) 0.0% 0.4%
14.00 GBP GDP (YoY) (Q4) 1.1% 1.1%
15.55 EUR German Unemployment Change (Mar) 28K -10K
17.00 EUR CPI (YoY) (Mar) 0.8% 1.2%
20.30 CAD GDP (MoM) (Jan) 0.1% 0.3%
22.00 USD                 CB Consumer Confidence (Mar) 112.0 130.7
Wednesday – 1st April 2020
07.50 JPY Tankan Large Manufacturers Index (Q1) -10 5
07.50 JPY Tankan Large Non-Manufacturers Index (Q1) 6 20
09.45 CNY Caixin Manufacturing PMI (Mar) 45.8 40.3
15.55 EUR German Manufacturing PMI (Mar) 45.4 45.7
16.30 GBP Manufacturing PMI (Mar) 47.0 48.0
20.15 USD ADP Nonfarm Employment Change (Mar) -154K 183K
22.00 USD ISM Manufacturing PMI (Mar) 45.0 50.1
22.30 CrudeOIL Crude Oil Inventories 1.623M
Thursday –2nd Mac 2020
16.30 GBP Construction PMI (Mar) 2.1% 2.1%
20.30 USD Initial Jobless Claims 750K 281K
Friday– 3rd Mac 2020
08.30 AUD Retail Sales (MoM) (Feb) 0.4% -0.3%
16.30 GBP Composite PMI (Mar) 36.7 37.1
16.30 GBP Services PMI (Mar) 34.8 35.7
20.30 USD Nonfarm Payrolls (Mar) -100K 273K
20.30 USD Unemployment Rate (Mar) 3.9% 3.5%
22.00 USD ISM Non-Manufacturing PMI (Mar) 44.0 57.3