8 July 2019 Weekly Analysis
GCMAsia Weekly Report: July 8 – 12
Market Review (Forex): July 1 – 5
US Dollar
Greenback propels higher last Friday while closing last week’s market at around 96.77 against a basket of other major currencies.
Earlier last week, dollar index was traded in a range while investors await the highly anticipated release of Nonfarm Payrolls report. Prior to the release, a few data from the region shows mixed signals with regards to US economic momentum. According to Institute for Supply Management, its manufacturing PMI rose to 51.7, exceeding economist forecast of 51.0 for the month of June. However, its non-manufacturing PMI for the same month experienced slightly contraction from 56.9 to 55.1. Likewise, ADP also reported a lower than expected job creation in the US private sector with the reading for the month of June coming in at 102,000 jobs. The data is lower than economist forecast of 140,000 but higher than previous reading of 41,000.
Nonetheless, trading volume on the greenback remains thin as market participants refrain from initiating larger trading size ahead of US Independence Day on Thursday. On Friday, market sentiment towards the greenback shift towards bullish following the release of better-than-expected Nonfarm Payrolls report. For the month of June, the US economy has generated 224,000 jobs, exceeding forecast of 160,000. Likewise, the data is higher than prior reading of only 72,000. Although Average Hourly Earnings and Unemployment Rate missed economist forecast, the Nonfarm Payrolls data has reduced bets upon more aggressive interest rate cut from the Federal Reserve.
USD/JPY
Pair of USD/JPY rebounds sharply from its prior low level, closing last week’s market at 108.45. Japanese yen which acts as a safe-haven asset were sold as investors favor the greenback following the release of bullish Nonfarm Payrolls report. However, gains on the pair of USD/JPY were limited as trade war risks continues to linger in the market after US announced possible tariff enactment upon EU’s exports.
EUR/USD
EUR/USD slumped sharply last Friday while closing last Friday’s market at around 1.1225. Earlier last week, Euro received bearish pressure after economic data from Germany portrays increasing risks for recession. For the month of June, both Manufacturing PMI and Unemployment Change came in at 45.0 and -1,000, missing economist forecast of 45.4 and -3,000 respectively. The data has increased market speculation for further monetary easing from the European Central Bank after they signaled to look into negative interest rates and its impact on commercial banking. For the time being, investors will continue to monitor upon future economic releases from the region to attain further market signals.
GBP/USD
Pair of GBP/USD extended its losses last Friday while closing last week’s market at around 1.2524. Overall, although recent economic releases from the UK illustrate bearish signals, the pair was traded flat earlier last week as investors await more signals with regards to Brexit and US’s Nonfarm Payrolls report. Sterling were sold off in a large sum last Friday as market participants shift their portfolio into US dollar following bullish figures from US jobs report. However, losses that were experienced by the pound sterling were limited while traders await the outcome of UK Prime Minister selection which will commence on 22nd July.
Market Review (Commodities): July 1 – 5
GOLD
Gold price continues to trade within a wide range while closing last week’s market at $1,397.95 a troy ounce. Overall, the safe-haven received large bearish pressure last Friday after bullish jobs report from the United States reduces market speculation for a 50-basis point rate-cut during its next policy meeting at the end of the month. However, losses upon gold remains limited as ongoing risks in the market such as Brexit, trade war and global recession continues to underpin the demand for the safe-haven asset.
Crude Oil
Crude oil price extended its losses throughout last week while closing its trade at $57.65 per barrel last Friday. Although OPEC and its non-OPEC members reached consensus to extend their oil cut production plan for 9 months, the news failed to bring bullish support upon the crude oil price.
In a bearish notion, Organization for Economic Cooperation and Development (OECD) reported that the current stock overhang is actually 10 times higher than the levels during 2010-2014. The report raised questions whether the nine-months extension from OPEC would bring any significant impact as oversupply continues to linger at a higher level. It would also take a much longer time to rebalance the market as OPEC kept their oil cut level at only 1.2 million barrels per day.
Likewise, oil price also received further bearish pressure with regards to global economic uncertainty and trade war issue. Recently, Beijing commented that they would not purchase American agriculture products if US “flip-flops” again in future trade negotiations. The remark sparked higher uncertainty over future trade negotiations in between US and China. As the uncertainty would jeopardize global economic growth and demand towards the crude oil commodity, traders began to react negatively after the comment was released.
Weekly Outlook: July 8 – 12
For the week ahead, investors will pay attention upon testimony delivered by the Federal Reserve Chairman Jerome Powell for further market signals. Likewise, they would also place their attention upon interest rate decision from the Bank of Canada in order to gauge their sentiment towards current policy setting.
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 8 – 12
| Monday, July 8 |
Data EUR – German Industrial Production (MoM) (May)
Events N/A
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| Tuesday, July 9 |
Data AUD – NAB Business Confidence (Jun) USD – JOLTs Job Openings (May)
Events USD – Fed Chair Powell Speaks
|
| Wednesday, July 10 |
Data CrudeOIL – API Weekly Crude Oil Stock GBP – GDP (MoM) GBP – Manufacturing Production (MoM) (May) CAD – BoC Interest Rate Decision CrudeOIL – Crude Oil Inventories
Events CAD – Monetary Policy Report CAD – BoC Press Conference USD – FOMC Meeting Minutes USD – Fed Chair Powell Testifies
|
| Thursday, July 11 |
Data EUR – German CPI (MoM) (Jun) USD – Core CPI (MoM) (Jun) USD – Initial Jobless Claims
Events CrudeOIL – OPEC Monthly Report EUR – ECB Publishes Account of Monetary Policy Meeting USD – Fed Chair Powell Testifies
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Friday, July 12
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Data CNY – Trade Balance (USD) USD – PPI (MoM) (Jun) CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events CrudeOIL – IEA Monthly Report
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