09 December 2019 Weekly Analysis
GCMAsia Weekly Report: December 09 – 14
Market Review (Forex): December 02 – 07
US Dollar
The dollar index which measure its value against a basket of six major currency plunged in the early last week, however the dollar index rebounded on last Friday market amid positive jobs data from the US region while closing its market at the price of 97.59. Greenback received a significant selloff against its rivals in the early last week mostly due to escalation in trade tension and a string of bleak U.S. economic data, however positive jobs data which released on last Friday limited the losses experienced by the greenback.
According to Institute for Supply Management, U.S. ISM Manufacturing Purchasing Managers Index (PMI) for last month came in at 48.1, weaker than the economist forecast at 49.2. Meanwhile the U.S. ISM Non-Manufacturing Purchasing Managers Index (PMI) came in at 53.9, lower than the market expectation at 54.5. Both data were fared worse than expectation, spurring a huge sell-off for the Dollar Index. However, U.S. Nonfarm payrolls came in at 266K, better than the economist expectation at 186k while the U.S. Unemployment Rate notched down to 3.5%, lower than 3.6%. Both employment data came in better than expectation which limited the losses experienced by the Dollar Index. These positive jobs data from the US region had indicated that despite the trade war has plunged US manufacturing into recession, however it has not yet spilled over to the broader U.S. economy, spurring some demand for the greenback on last Friday.
With regards to trade war, Greenback received a huge bearish momentum following U.S. President Donald Trump claimed that a trade deal with China might have to delay until after the 2020 U.S. Presidential Election. In addition, he reiterated that he had no deadline on the trade agreement with China. Such negative sentiment had increased the trade tensions between U.S and China, which further spurring the sell-off for the dollar index. In fact, US President Donald Trump said that his administration would impose tariffs on metal imports from Argentina and Brazil, and likely to impose more on a range of French goods. Such sentiment had increased the geopolitical risk for the United Stated, spurring a further bearish momentum for the dollar index. At this time, market participants remain fixated upon ongoing headlines of trade war as the trade problem have not yet been resolved completely.
USD/JPY
Pair of USD/JPY was traded lower last week while ending last Friday session at the price of 108.58. Likewise, trade pessimism between US and China has reduced the risk appetite, which insinuating the demand for safe-haven assets such as Japanese Yen. However, Japanese Yen received a huge bearish momentum following the bleak data was released. According to Statistics Bureau, Japan Household Spending (MoM) for last month notched down to -11.5%, worse than the economist forecast at -9.8%, which limited the gains experienced by the Japanese Yen.
EUR/USD
Pair of EUR/USD slumped last week while closing last Friday’s trading session with the price of 1.1103. The pair received some sell-off pressure for last week despite the positive data from the EU region. According to Markit Economics, Germany Manufacturing Purchasing Manager Index (PMI) notched up from 43.8 to 44.1, exceeding the economist forecast at 43.8. Meanwhile, Germany Services Purchasing Managers Index (PMI) came in at 51.7, exceeding the the market expectation at 51.3. However, although recent economic data from the Europe region were fared better than expectation, the Euro still received a bearish momentum on last Friday amid to the strongness in the rival currencies, especially in U.S Dollar.
GBP/USD
GBPUSD was traded higher throughout the entire last week while closing its Friday market at 1.3135. Last week, investor put in more capital into pound sterling market as optimism on general election continue to weigh on the market sentiment of pound. According to the YouGov survey, the poll shows that Conservative party which lead by current Prime Minister Boris Johnson holding a higher chance (43%) to win majority seat in upcoming election while comparing to opponent parties such as Labour party (32%). However, investors are now start to shy away themselves from pound market as the risk of uncertainty in UK election is still very high.
Market Review (Commodities): December 02 –07
GOLD
Gold price had undergo large volatile transaction throughout the entire last week and closing its Friday market at $1459.60 a troy ounce. Earlier last week, gold received a huge demand from market after pessimistic data been released in US region, such as ISM Manufacturing PMI and ADP Nonfarm Employment Change (Nov) came in at 48.1 and 67K, weaker than market expectation at 49.2 and 149K respectively. However, gold loss its ground during the end of last week after Nonfarm Payrolls showed a reading unexpectedly higher than market forecast, 266k versus 186K. Besides, a slightly decline in Unemployment rate data further dragged down the sentiment of gold market as these data showed that US labor market is still remain strong.
CrudeOIL
Oil price was traded higher while closing last week market session with $59.20 per barrel. The oil price was lifted up by the market participants throughout the entire last week due to decline in crude oil inventories data and further cut on oil production by OPEC.
In the earlier of the week, Oil market was remain scented as crude oil data from API and EIA showed a decline in inventories level. According to API, crude oil inventories data came in at -3.720M, lower than economist forecast of stockpile with 3.639M. Besides, EIA crude oil inventories also showed a huge decline in US inventories level where the data came in at -4.856M, weaker than market expectation of -1.734M, while showing that the crude oil demand has been rising despite the ongoing trade deadlock.
Besides, oil price skyrocketed further and posted its largest percentage weekly gain since June after OPEC and its allies come into a consensus to deeper their cut on oil production. In OPEC Vienna meeting, OPEC members and other non OPEC members have confirmed to cut another 0.5 million bpd to 1.7 million bpd starting in January 2020. In fact, the total oil output reduction is even higher than 1.7 million as Saudi Arabia said it would curb its output by additional 0.167 million bpd while continue with its voluntary cuts of 0.4 million barrel a day, a beyond quota limit cut further lifted up the oil market sentiment. According to the OPEC meeting, this oil curb plan will be existing until the end of 2020 first quarter while extraordinary meetings will be held on March 5 and 6 to further determine whether to readjust their oil cut plan or not. As of now, investor will eye on more crude oil inventories data and the development of trade talk to further gauge the direction of oil market.
Weekly Outlook: December 09 – 14
For the week ahead, investors will pay attention upon key event such as interest rate decisions which will be announced by few central banks such as Fed, SNB and ECB as well.
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 09 – 14
| Monday, December 9 |
Data JPY – GDP (QoQ) (Q3) Events N/A
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| Tuesday, December 10 |
Data GBP – GDP (QoQ) (Q3) GBP – Manufacturing Production (MoM) (Oct) EUR – German ZEW Economic Sentiment (Dec)
Events AUD – Mid-Year Economic and Fiscal Outlook
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| Wednesday, December 11 |
Data CrudeOIL – API Weekly Crude Oil Stock USD – Core CPI (MoM) (Nov) USD – CPI (MoM) (Nov) CrudeOIL – EIA Crude Oil Inventories
Events N/A
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Thursday, December 12 |
Data USD – Fed Interest Rate Decision CHF – SNB Interest Rate Decision EUR – Deposit Facility Rate (Dec) EUR – ECB Marginal Lending Facility EUR – ECB Interest Rate Decision (Dec) USD – PPI (MoM) (Nov)
Events USD – FOMC Economic Projections USD – FOMC Statement USD – FOMC Press Conference CHF – SNB Monetary Policy Assessment CHF – SNB Press Conference GBP – U.K. General Election EUR – ECB Monetary Policy Statement EUR – ECB Press Conference
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Friday, December 13
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Data JPY– Tankan Large Manufacturers Index (Q4) JPY – Tankan Large Non-Manufacturers Index (Q4) USD – Core Retail Sales (MoM) (Nov)
Events CAD – BoC Gov Poloz Speaks |
| Saturday, December 14
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Data
CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events N/A
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