1 July 2019 Weekly Analysis
GCMAsia Weekly Report: July 1 – 5
Market Review (Forex): June 24 – June 28
US Dollar
Dollar index was traded flat near the price level of 95.60 throughout the entire last week while closing its market on last Friday at 95.65. Last week, mixed signal from the economic data stunned the investor sentiment toward the dollar market, while keeping their eye on Japan Osaka G20 summit which held on last Friday.
Earlier last week, dollar received bearish momentum from the market after release of downbeat data such as CB Consumer Confidence and New Home Sales. Both data came in at a rate of 121.5 and 626k respectively, weaker than economist forecast of 131.1 and 680K. However, Greenback managed to recover part of its losses during later of last week as data such as Core Durable Goods Orders, GDP, Pending Home Sales and Michigan Consumer Sentiment showed optimistic reading as compare to economist forecast. Those upbeat data uplifted the market sentiment toward greenback as economic data indicating that the US economy is still remain resilient despite geopolitical tensions with Iran and trade impasses with China.
On last Friday G20 Summit, US and China has come to a consensus that both countries will hold off on new tariff and will continue to have further negotiations on trade deal. Besides, US president Donald Trump has also made a new announcement regards to Huawei issue where he will be reversing the previous government decision to ban US companies from selling products to Huawei. Both significant decisions made by US recovered the dollar’s appeal as market participants anticipate a trade deal might be reached sooner or later.
USD/JPY
USD/JPY rebounded from the six months’ low last week while closing last Friday’s market at 107.93. Last week, appeal of Japanese yen fell as market appetite toward safe haven asset dampened following Tokyo CPI data showed a reading of 0.9%, lower than economist forecast of 1.0%. Besides, positive data from US region and good progress in trade talk between US and China in G20 Summit last week urged the investors to shift their portfolio investment from Japanese yen to dollar market.
EUR/USD
The pair of EUR/USD remains consolidated throughout the entire last week while closing last Friday’s market at 1.1370. Last week, euro received huge demand from the market as all of the crucial economic data from the European zone showed optimistic reading which indicating the risk of EU economy slowing down decreased. The economic data included German Ifo Business Climate Index and Eurozone CPI came in at a reading of similar to economist forecast, 97.4 and 1.2% respectively. Likewise, German CPI and French CPI data further uplifted the market sentiment toward the euro currency as both data managed to show a reading exceeded the anticipation of economists forecast. However, progress in trade talk between both largest economy bodies on last week dragged down the demand of euro and urged investor to move their investment toward dollar.
GBP/USD
Pair of GBP/USD extended its losses throughout the last week while closing the Friday market at around 1.2695. Last week, UK leadership contest famous candidate Boris Johnson said that he will try his best to pull UK out of Eurozone no matter hard or soft Brexit before the due date on 31th October 2019. This news has deteriorated the market sentiment toward Pound due to the uncertainty of Brexit. However, pound recovered part of its losses following Boris Johnson emphasized that if UK eventually unconditionally leaving from EU, UK will try to renegotiate with EU regarding to trade tax regulations. Besides, good news from Trump and Xi Jinping bilateral meeting at G20 Summit in Japan also further boosted up the demand of dollar and urged the investor to sell off their pound investment.
Market Review (Commodities): June 24 – June 28
GOLD
Gold price extended its retracement following hitting the six-year high level while closing its trading at around $1408.85 a troy ounce. The yellow metal received huge sell off following development of trade talk between US and China. In the Japan G20 summit, Trump and Xi has agreed to restart trade talks, put a hold on new tariffs and will remove Huawei from blacklist lifted up the risk appetite of market as investors believe tensions relief between two largest economy blocs will recover the global economy slowdown condition.
Crude Oil
Crude oil price extended its gains throughout last week while closing the market on last Friday at $58.15 per barrel. Earlier last week, black commodity market sentiment remain negative following US President Donald Trump said they will not protect the oil ship of other countries as US do not have the authority to protect their oil ship on behalf of them, via twitter.
However, positive crude oil inventories data on last week managed to drag up the shininess of this black commodity. Based on the recent data, API and EIA inventories data came in at -7.550M and -12.788M, exceeding previous reading of -0.812M and -3.106M respectively, recording drop in stockpile for two consecutive weeks. Moreover, oil prices rose sharply after news showed that US are now in position if war breaks out. Heightened of political tensions between US and Iran consisted high possibility that oil supply will be disrupted if US decided to take further action against Iran.
Besides, crude oil also received another wave of huge demand from the market following Russia and Saudi Arabia agreed to extend their oil cut production plan by six to nine months in Japan G20 summit last Saturday. Prior to the July OPEC meeting, OPEC member has cut its production by more than 1.2 Million barrel per day and the plan has been expired on 30th of June. As of now, the term and details of latest extension of oil cut production plan are still blur and investor are now eyes on upcoming OPEC meeting and it is highly anticipated that the plan details discussed in the meeting and will be announced shortly after the meeting.
Weekly Outlook: July 1 – 5
For the week ahead, investors will keep an eye on the new trade talk between US and China to determine to direction of Dollar. Besides that, other important economic data such as ADP Nonfarm Employment and Nonfarm Payrolls will also determine the direction of the currencies.
As for oil traders, they will be eyeing on OPEC meeting and 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: July 1 – 5
| Monday, July 1 |
Data JPY – Tankan Large Manufacturers Index (Q2) JPY – Tankan Large Non-Manufacturers Index (Q2) CNY – Caixin Manufacturing PMI (Jun) EUR – Manufacturing PMI (Jun) GBP – Manufacturing PMI (Jun) USD – Manufacturing PMI (Jun)
Events CNY – PBOC Gov Yi speaks CrudeOIL – OPEC Meeting
|
| Tuesday, July 2 |
Data AUD – RBA Interest Rate Decision (Jul) EUR – German Retail Sales (MoM) (May) GBP – Construction PMI (Jun)
Events AUD – RBA Rate Statement GBP – BoE Gov Carney Speaks
|
| Wednesday, July 3 |
Data CrudeOIL – API Weekly Crude Oil Stock GBP – Services PMI (Jun) USD – ADP Nonfarm Employment Change (Jun) CAD – Trade Balance (May) CrudeOIL – Crude Oil Inventories
Events N/A |
| Thursday, July 4 |
Data AUD – Retail Sales (MoM) (May) EUR – Retail Sales (MoM) (May)
Events N/A
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Friday, July 5
|
Data EUR – German Industrial Production (MoM) (May) USD – Average Hourly Earnings (MoM) (Jun) USD – Nonfarm Payrolls (Jun) CAD – Employment Change (Jun) CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events N/A |