30 December 2019 Weekly Analysis
GCMAsia Weekly Report: December 30 – January 04
Market Review (Forex): December 23 – 28
US Dollar
The dollar index which measure its value against a basket of six major currency slumped in last week following a string of bleak U.S. data which pointed to weak economic growth in U.S. while closing its market at the price of 96.57. In addition, the Greenback received a further sell-off against its rivals in the last week amid to trade optimism around prospect for a “phase one” U.S-China trade deal, which stoked a shift in the market sentiments toward riskier asset, sapping the demand for the safe-haven currencies such as greenback.
Greenback has been plagued with concerns over slowing economic momentum in the United States. According to Census Bureau, U.S. New Home Sales came in at 719K, missing the economist forecast at 734K. Besides that, U.S. Core Durable Goods order for last month notched down from the previous reading of 0.3% to 0.0%, significantly lower than the market forecast at 0.1%. Both data fared worse than expectation, dialing down market optimism towards economic progression in the United States while strengthen the belief that the Federal Reserve will stimulate further easing monetary policy in order to boost the economic growth. However, according to Department of Labor, U.S. Initial Jobless Claims reduced from the previous reading of 235K to 222K, beating the economist forecast at 224K, which indicating that the jobs market in the United States was still remained strong while limiting the losses experienced by the greenback.
With regard of trade war, the dollar index received further bearish momentum amid easing trade tensions between U.S and China, which stoked a shift in sentiment toward riskier asset while dragged down the appeal of safe-haven currencies such as dollar index. According to Reuters, U.S. President Donald Trump said on last Tuesday that he and Chinese President Xi Jinping will have a signing ceremony to sign the first phase U.S China trade deal soon. In addition, Chinese Foreign Minister spokesman Geng Shuang also reiterated on last Wednesday that both countries were having a very good negotiation between each other, spurring a further trade optimism outlook. Despite that, the Beijing has not yet officially confirmed any specific components with regards of the trade deal. At this time, market participants remain fixated upon ongoing headlines of trade war until the trade problem has resolved completely.
USD/JPY
Pair of USD/JPY was traded lower last week while ending last Friday session at the price of 109.38. Likewise, Japanese Yen received some bearish momentum during the early last week amid to positive trade prospect for US-China, which spurred some risk-on sentiment to the market. With regards to trade war, market participants are anticipating that the trade deal will be signed during the first week of January, which dragged down the appeal of the safe-haven currency. However, losses experienced by the Japanese Yen was limited following the data from the Japan region were fared better than expectation, spurring positive sentiment towards the economic progression in Japan while insinuating the demand for the pair. According to Statistics Bureau, Japan Tokyo Core Consumer Price Index (CPI) for last month notched up from the previous reading of 0.6% to 0.8%, exceeding the economist forecast at 0.6%. Meanwhile, the Japan Industrial Production for last month came in at -0.9%, which also shown better than the economist forecast at -1.4%.
EUR/USD
Pair of EUR/USD skyrocketed last week while closing last Friday’s trading session with the price of 1.1175. The overall bullish momentum for the pair was mostly due to the weakness in the rival currencies, especially in U.S dollar. On the other hand, the Euro has recovered most of its losses on last week amid to market participants started to adjusting their positions in the Euro market before the end of the year amid speculation that the Eurozone economy could be strengthen in the next year. Despite for much of 2019, investors sold the Euro amid to the bleak economy performance in the Eurozone’s. However, the recent data from the European region has begun to indicate some signs of the recovery, boosting the hopes that the bloc’s economy will tend to be stronger while insinuating the demand for the Euro. However, the gains experienced by the Euro is limited as the fears of hard Brexit is still remained. If a hard Brexit occur between UK and EU, it would eventually harm the both countries economy in term of future trade condition.
GBP/USD
Pair of GBP/USD surged throughout the entire last week amid to hopes upon the soft-Brexit increased, while closing its Friday market at 1.3081. Many investors have been hesitant to purchase the Pound Sterling in the early last week following the UK Prime Minister Boris Johnson set a hard deadline of December 2020 to reach a new trade deal with the EU, spurring some fears of the hard-Brexit as investors believed that it would be insufficient time to make an efficient trade deal between both countries. However, until recently many analysts predicted that the UK would most likely to extend the Brexit transition period in future in order to ensure UK government and European Union are able to achieve a solid Brexit deal, which stimulating some positive prospect for the soft-Brexit while increasing the demand for the Pound Sterling. However, investors would still need to scrutinize the latest official updates with regards of the Brexit issue in order to gauge the movement for the pair.
Market Review (Commodities): December 23 – 28
GOLD
Gold price continually to receive bullish momentum for the entire last week, while closing its Friday market at $1510.79 per troy ounce. Earlier last week, gold price edged higher as the two important data from the U.S. region were fared worse than expectation, indicating weak economic performance in the United States while insinuating demand for the safe-haven metal. On the other hand, gold price received a further demand from the market participants in the year end as they were engaging in tax-loss harvesting to offset realized capital gains, prompting a sell-off of stock in the equity market while shifting their portfolio towards the safe-haven metal such as gold. In addition, gold price edged higher amid investors continued to seek out the safe-haven metal as an insurance for the potential drop in the equity market in the early next year.
CrudeOIL
Oil price was traded higher while closing last week market session with $61.70 per barrel. Oil price was lifted up by the market participants throughout the entire last week due to the trade optimism between the United State and China. In fact, market participants expected the resolution of trade war may improve the global economic growth, which would be spurring a significant demand for the black commodity in the future.
In addition, the oil market was remained scented as crude oil data from EIA showed a decline in inventories level. According to Energy Information Administration, the U.S. crude oil inventories notched down from the previous reading of -1.085M to -5.474M, lower than the economist forecast of -1.724M, indicating the demand for the oil market is still remained strong despite there is a trade deadlock while enhancing further demand for the commodity. As of now, investors will continue to eye on more inventories data as well as trade development between U.S. and China in order to gauge the future movement for the oil market.
Weekly Outlook: December 30 – January 04
For the week ahead, investors will pay attention upon key event such as U.S. CB Consumer confidence and the China Manufacturing Purchasing Managers Index (PMI) which will be announced within this week in order to obtain further trading signal.
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: December 30 – January 04
| Monday, December 30 |
Data USD – Pending Home Sales (MoM) (Nov) Events N/A
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| Tuesday, December 31 |
Data CNY – Manufacturing PMI (Dec) USD – CB Consumer Confidence (Dec)
Events N/A |
| Wednesday, January 01 |
Data CrudeOIL – API Weekly Crude Oil Stock
Events N/A
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Thursday, January 02 |
Data CNY – Caixin Manufacturing PMI (Dec) EUR – German Manufacturing PMI (Dec) GBP – Manufacturing PMI (Dec) USD – Initial Jobless Claims USD – Manufacturing PMI (Dec)
Events N/A |
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Friday, January 03
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Data EUR – German Unemployment Change (Dec) GBP – Construction PMI (Dec) USD – ISM Manufacturing PMI (Dec)
Events USD – FOMC Meeting Minutes |
| Saturday, January 04
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Data
CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events N/A
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