31 August 2020                      Weekly Analysis

GCMAsia Weekly Report: August 31 – September 4

Market Review (Forex): August 24 – 29

US Dollar

The dollar index which traded against a basket of six major currency pairs slumped last week amid the resurgence of the coronavirus infections from the U.S. region as well as the dovish statement with regards of the U.S central bank’s policy framework review had dialed down the market optimism toward the economy progression in the United States, which spurring significant selloff for the US Dollar last week. The Dollar Index was closing its price on last Friday session at the price of 92.23.

 

According to Reuters, the Federal Reserve Chairman Jerome Powell said that the U.S central bank would continue to roll out an aggressive monetary stimulus plan in order to boost the U.S employment and also inflation rate in the United States. Besides, he reiterated that the U.S. Central Bank will seek to achieve average target inflation at 2% for the year while ensuring employment rate does not fall short of its maximum level. The rock-bottom interests’ rates and concerns about dovish statement have reduced the appeal of the US Dollar, while a relatively high level of coronavirus infections is also casting doubts on the U.S. economy recovery compared with other regions. As for now, investors would continue to scrutinize the further economic data as well as the coronavirus development in order to gauge the likelihood movement for the pair.

 

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. The outbreak of the coronavirus had tremendously destroyed the U.S. economy while millions of Americans had lost their jobs due to the pandemic crisis.  According to Department of Labor, the U.S. Initial Jobless Claims came in at 1,006K, worse than the market forecast at 1,000K. Meanwhile, the Conference Board reported that the U.S. CB Consumer Confidence notched down significantly from the previous reading of 91.7 to 84.8, worse than the market forecast at 93.0. Similarly, the U.S. Gross Domestic Product (GDP) had also declined significantly from the previous reading of -5.0% to -31.7%. However, the losses experienced by the Dollar index was limited over the backdrop of some positive economic data from the United States. According to National Association of Realtor, the U.S. Pending Home Sales and U.S. Core Durable Goods Orders for last month came in at 5.9% and 2.4%, which fared better than the market expectation at 3.0% and 2.0% respectively.

 

USD/JPY

Pair of USD/JPY was traded lower last week while ending last Friday session at the price of 105.35. The Japanese Yen received significantly bullish momentum following Japan Prime Minister announced that he would step down from tis current position due to worsening of health condition. According to the latest news, 65 years old Shinzo Abe has decided to resign as he has been struggling with a relapse of his chronic illness since few years ago. Back to year 2012, Shinzo Abe had introduced an economic policy which known as ‘Abenomics” in Japan. Basically, Abenomics consists of monetary easing from Bank of Japan, fiscal stimulus through government spending and structural reforms which literally aimed to revive the economic after years of deflation happened in Japan. Despite the effectiveness of Abenomics was not as useful as observers had hoped, but still managed to spark up the economic GDP and stabilized the economic growth. Nonetheless, the future outlook of Japan turns faded as investors still eyeing on the successor of Shinzo Abe in the backdrop of economic is still struggling under pandemics’ fallout.

 

EUR/USD

Pair of EUR/USD surged on last week while closing last Friday’s trading session with the price of 1.1904. The overall bullish momentum of the pair was mostly due to the weakening in the rival currencies, especially in US Dollar. Besides, the Euro extend its gains following the German Economy Minister Altmaier claimed on Friday that he does not expect another shutdown of the economy even if the coronavirus infections continue to rise.  Besides, he reiterated that many industries from the Germany region were regaining momentum, which spurring market optimism toward the economic recovery from the European region.

 

GBP/USD

The pair of GBP/USD surged on last week while closing its market at 1.3345. The overall bullish momentum for the pair was mainly due to the depreciation of the US Dollar. In fact, the Pound Sterling extend its gains following the Bank of England had provided market confidence toward the economic progression in UK. According to Reuter, the Bank of England Governor Andrew Baily said the British central bank had more ammunition to support the economy after its coronavirus lockdown shock, while reiterating that the previous aggressive monetary stimulus had successfully aid the economic recovery from the UK region. Nonetheless, the worsening relationship between UK and European region had weighed the market demand for the Pound Sterling, which limiting the gains experienced by the GBP/USD.

 

Market Review (Commodities): August 24 – 29

GOLD

Gold price was traded higher in overall last week while closing its market on Friday at $1963.26 per troy ounce. The safe-haven gold edged higher following the U.S Central Bank provided dovish statement during the meeting of the virtual Jackson Hole Symposium. The Federal Reserve Chairman Jerome Powell fueled expectations that the U.S. interest rates could remain low for a long time to come by signaling that the U.S. Central Bank would aim for inflation rates to average 2%. Besides that, the unstoppable accelerating number of the coronavirus had also stoked a shift in sentiment toward the safe-haven asset, which sparkling further demand for the safe-haven gold. As for now, the global coronavirus cases had spiked up to more than 25 million people while 850,000 people were killed by the virus. As for now, investors would scrutinize the latest development with regards of the coronavirus vaccine as well as further US economic data in order to receive further trading signal for the commodity.

 

CrudeOIL

The crude oil price surged on last week while closing last Friday session with $42.95 per barrels. The oil market was traded higher over the backdrop of the positive inventory data on last week. According to Energy Information Administration, the U.S. Crude Oil inventories had declined significantly from the previous reading of -1.632M to -4.689M, worse than the market forecast at -3.694M. Besides that, the U.S. Government said in a report released on Friday that the energy firms had shut 1.07 million barrels per day (bdp) of crude oil production in the U.S. Gulf of Mexico amid twin threat from Hurricane Marco and Tropical Storm Laura. The supply shock destruction had spurred bullish momentum toward the crude oil price.

 

Weekly Outlook: Aug 31 – Sept 4

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 UK Composite PMI and Service PMI 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 developement to gauge the strength of crude demand for world’s largest oil consumer.

 

Highlighted economy data and events for the week: August 31 – Sept 4

Time Market Event Actual Forecast Previous
Isnin – 31hb Ogos 2020
 
09:00 CNY Manufacturing PMI (Aug) 51.2 51.1
Selasa –1hb Sep 2020
09:45 CNY Caixin Manufacturing PMI (Aug) 52.7 52.8
12:30 AUD RBA Interest Rate Decision (Sep) 0.25% 0.25%
15:55 EUR German Manufacturing PMI (Aug) 53.0 53.0
15:55 EUR German Unemployment Change (Aug) 1K -18K
16:30 GBP Manufacturing PMI (Aug)  – 55.3 55.3
17:00 EUR CPI (YoY) (Aug)  – 0.2% 0.4%
22:00 USD ISM Manufacturing PMI (Aug)  – 54.5 54.2
Rabu – 2hb Sep 2020
04:30 CrudeOIL                 API Weekly Crude Oil Stock -4.524M
09:30 AUD GDP (QoQ) (Q2) -6.0% -0.3%
20:15 USD ADP Nonfarm Employment Change (Aug) 900K 167K
22:30 USD Crude Oil Inventories -4.689M
Khamis – 3hb Sep 2020
16:30 GBP Composite PMI (Aug) 60.3 60.3
16:30 GBP Services PMI (Aug) 60.1 60.1
20:30 USD Initial Jobless Claims 1,006K
22:00 GBP BoE Gov Bailey Speaks
22:00 USD ISM Non-Manufacturing PMI (Aug) 57.0 58.1
Jumaat– 4hb Sep 2020
09:30 AUD Retail Sales (MoM) (Jul) 3.3% 2.7%
16:30 GBP Construction PMI (Aug) 58.3 58.1
20:30 USD Nonfarm Payrolls (Aug) 1,400K 1,763K
20:30 USD Unemployment Rate (Aug) 9.8% 10.2%
20:30 CAD Employment Change (Aug) 300.0K 418.5K
22:00 CAD Ivey PMI (Aug) 57.5 68.5