5 August 2019 Weekly Analysis
GCMAsia Weekly Report: August 5 – August 9
Market Review (Forex): July 29 – August 2
US Dollar
Greenback was traded lower after hitting 2 years high at 98.65 amid mixed data signal from the market and escalation of trade war between China and US.
Earlier last week, dollar index received strong bullish momentum following the release of upbeat data such as CB Consumer Confidence and Pending Home Sales data. Both data came in at optimistic reading, 135.7 and 2.8% respectively while beating the economist forecast of 125.0 and 0.5%. Besides, Nonfarm Payrolls and Unemployment rate data which announced on later last week also further supported the dollar index gains and pushed the dollar index to a new high level. Nonfarm payrolls and unemployment rate showed a reading of 164k and 3.7%, similar to the market expectation. All the economic data in US showed that US economy is still remain favorable while comparing to the economy development of other countries.
After a decade, Federal Reserve has decided to cut its interest rate by 25 basis point as investor expectation on last Thursday. During the Fed’s monetary policy statement which led by Jerome Powell, he stated that 0.25% of downward adjustment is sufficient to support the economy development as of now. Besides, he also emphasized that US economy is still remain outstanding when compared to other countries such as Eurozone and UK. Hence, they will continue to eyes on further economic data to determine whether a rate cut will be conducted in later this year.
On the other hand, heightened of trade war between two largest economic bodies US and China has blotted out the gains of dollar index last week. After 2-days trade talk in Shanghai, US President announced that they are deciding to impose an additional tariff on 300 billion worth of China imported goods and can even be risen to 25% if they want to, via Twitter. Donald Trump’s decision has eventually provoked China, and they immediately accused US that China are ready to take countermeasures if US implement additional tariff. AS of now, investors will keep an eye on trade war between US and China to gauge the direction of dollar.
USD/JPY
The Japanese Yen extended its losses throughout last week while closing last Friday’s market around 106.60. In earlier last week, Japanese yen received strong bearish momentum from the market following Bank of Japan (BoJ) maintained its interest rate at ultralow level -0.10% while lowering their forecast of inflation outlook from 1.4% to 1.3%. Besides, they also reiterated that they are ready to ease their monetary policy further without hesitation if they are getting “too far away” from their inflation target and continue struggling in economic downturn. However, Japanese yen managed to revive from bulk sell off pressure following Sino-US trade war escalated as US ready to impose additional tariff on China imported goods.
EUR/USD
EUR/USD extended its losses throughout last week despite a set of bullish economic data while closing its market on Friday at 1.1105. Earlier last week, the single currency was largely buy in by the market participants following the release of upbeat German Retails Sales data and German Unemployment Change. However, Euro failed to extend its gain throughout last week as optimistic economic data urged the investor to shift their investment portfolio toward dollar index. However, Euro managed to recover from its losses amid heightening trade tensions between US and China. For now, investors will focus on this week’s economic data from German and the Eurozone to obtain further signals in the market.
GBP/USD
GBP/USD plummets throughout last week while closing last Friday trading session at the price of 1.2160. Pound Sterling continue to receive huge sell off pressures from the market amid Brexit uncertainty and dovish note from Bank of England (BoE) chairman. Early last week, United Kingdom new prime-minister Boris Johnson reiterated that they have the responsibility to prepare for no deal Brexit if there are not further agreement been made between EU and UK before 31th October 2019, thus it urged the investor to sell off their Pound holding as the possibility of hard Brexit has heightened. Moreover, Bank of England has also decided to maintain its interest rate at 0.75% unchanged while commented that financial condition in UK are not stable due to Brexit dispute despite domestic inflation pressure have slightly strengthened.
Market Review (Commodities): July 29 – August 2
GOLD
Gold price managed to extend its gains throughout entire last week while closing market at $1440.55 a troy ounce. The sentiment of this yellow metal market remain bullish as escalation of trade dispute between China and US continue to push the investor to move their asset toward gold market. Last week, US President Donald Trump has made an announcement to impose additional tariff on china imported good which amounted to 300 billion. Besides, increasing of hard Brexit possibility has also further dragged up the shininess of this yellow product as investors aware that hard Brexit will create imbalance and unclear trade condition between Eurozone and UK and hence cumber the economy development.
Crude Oil
Crude oil price extend its losses throughout last week while ending last week market session with the price $55.20 per barrel. During earlier last week, crude oil data showed a major drop in supply where API Weekly Crude Oil Stock and EIA Crude Oil Inventories showed -6.024M and -8.496M. A crucial drop in crude oil inventories triggered bullish momentum toward this black commodity, successfully regained the market confidence.
However, escalation of trade dispute between China and US has limited the gains of crude oil and even further dragged down its price to 3 weeks low level. Last Wednesday, Donald Trump announced that they will impose additional 10% tariff on china imported goods as there is no any material progress between both countries in the earlier trade talk. The intention behind implementation of additional tariff was China did not honor the promise that they have made with US where agreed to buy more agriculture products from US country.
Escalating of tensions between both countries enhanced the worries of market participants toward global supply gluts as China might start to purchase crude oil from Iran, as a countermeasure against US. As of now, Investors will continue to monitor the crude oil inventories data and the trade talk development between US and China.
Weekly Outlook: August 5 – 9
For the week ahead, investors will pay attention upon key data such as ISM Non-Manufacturing PMI as well as PPI data to further gauge the market.
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: August 5 – 9
| Monday, August 5 |
Data GBP – Composite PMI (Jul) GBP – Services PMI (Jul) USD – ISM Non-Manufacturing PMI (Jul)
Events N/A
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| Tuesday, August 6 |
Data NZD – Employment Change (QoQ) (Q2) AUD – RBA Interest Rate Decision (Aug) USD – JOLTs Job Openings (Jun)
Events AUD – RBA Rate Statement
|
| Wednesday, August 7 |
Data CrudeOIL – API Weekly Crude Oil Stock NZD – RBNZ Interest Rate Decision EUR – German Industrial Production (MoM) (Jun) CAD – Ivey PMI (Jul) CrudeOIL – Crude Oil Inventories
Events NZD – RBNZ Monetary Policy Statement NZD – RBNZ Rate Statement
|
| Thursday, August 8 |
Data USD – Initial Jobless Claims
Events EUR – ECB Economic Bulletin
|
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Friday, August 9
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Data JPY – GDP (QoQ) (Q2) GBP – GDP (MoM) GBP – Manufacturing Production (MoM) (Jun) USD – Core PPI (MoM) (Jul) USD – PPI (MoM) (Jul) CAD – Employment Change (Jul) CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events AUD – RBA Monetary Policy Statement USD – IEA Monthly Report
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