11 November 2019                Weekly Analysis

GCMAsia Weekly Report: November 11 – 15

Market Review (Forex): November 4 – 8

US Dollar

The dollar index which is measured against a basket of six major currency pairs surged last week while closing last Friday market at the price of 98.15. Greenback held the upper hand against its rivals on last week mostly due to rising hopes for US-China trade deal and a string of solid U.S. economic data.

According to Institute for Supply Management, U.S. ISM Non-Manufacturing Purchasing Managers Index (PMI) better than the forecast of 53.5, came in at 54.7 prior to 52.6 for last month. Such positive data has spurred a positive economic outlook in the US region, insinuating the demand for the index. However, according to Bureau of Labor Statistics, U.S. JOLTs Job Openings came in at 7.024M, weaker than economist forecast for a reading of 7.028M, limit the gains experienced by the Dollar Index.

With regards to trade war, Greenback received a huge bullish momentum following upbeat trade news have helped lifted the greenback. According to Reuters, US Commerce Secretary’s Wilbur Ross claimed that licenses for US companies to sell components to China’ Huawei Technologies Co “will be forthcoming very shortly”. In addition, China was pushing U.S President Donald Trump to remove more tariffs which is imposed in September in order to sign the “phase one” deal later this month. Market are expecting that the U.S may postpone the remaining tariff, thus providing a boost for the sentiment in greenback. On last Thursday, the new location for trade deal was set in London after meeting in Chile cancel amid to protection. Trade optimism was further escalating after the world’s two largest economies have agreed to roll back tariffs on each other’s’ goods as part as the first phase of a deal, according to the officials from US and China said on Thursdays. However, according to the latest news on last Friday, Donald Trump claimed that he had not agreed to roll back tariffs from the China, which further magnified the uncertainty and limit the gains experienced by the Dollar index. As such, market participants remain fixated upon ongoing headlines of trade war as both countries only reached a partial truce and not resolved completely.

 

USD/JPY

USD/JPY was traded higher last week while ending last Friday session at the price of 109.19. Japanese Yen received some bearish support following positive U.S. ISM Non-Manufacturing Purchasing Managers Index (PMI) from the United States released. Likewise, trade optimism between US and China has increased the risk appetite, which pushed the demand for risky assets higher and spurring a sell-off for the safe-haven such as Japanese Yen.

 

EUR/USD

Pair of EUR/USD slump last week while closing last Friday’s trading session with the price of 1.1019. Euro received some sell-off pressure despite the positive data from the EU region was released. According to Markit Economics, Germany Manufacturing Purchasing Managers Index (PMI) came in at 42.1, exceeding the economist forecast at 41.9 for last month. In fact, Manufacturing PMI notched up from 45.7 to 45.9, exceeding the economist forecast at 45.7 for the month of October. However, although recent economic data from the region “fared better than expected”, the Euro still received a bearish momentum amid to the strongness in the rival currencies, especially in U.S dollar.

 

GBP/USD

Pair of GBP/USD was traded lower while ending the market at the price of 1.2775. Pound Sterling received some sell-off following the Bank of England delivered some dovish sentiment to the market participants, despite Bank of England maintained the interest rate at current rate 0.75%. According to the Reuters, two Bank of England officials unexpectedly voted to cut interest rates in future during their monetary meeting, and others said they would continue to scrutinize future economy data in UK to gauge the likelihood of an interest rate cut. In overall, market sentiment toward the pair is still remain tepid as market are still awaiting results of general election on 12th December 2019.

 

Market Review (Commodities): November 4 – 8

GOLD

Gold price plunged to one-month low last week while ending the market at around $1458.82 a troy ounce. The safe-haven metals have experienced a significant sell-off amid to positive data from the US region and trade war optimism. Positive data in US has provided some bullish support on the greenback, stimulating a further sell-off on the safe-haven. On the other hand, the rise in trade war optimism increased the risk appetite and drove higher demand in equity markets, which pushed U.S stocks and Treasury yields higher and spurred the selloff on the gold futures. However, the commodity manages to limit its losses after the US President Donald Trump said on Friday that despite China was pushing for the removal of some tariffs as part of an agreement, he will not agree on “tariff roll back” against China. Eventually, US President dovish tone on trade war dampened the market risk appetite, sparkled the demand for the safe-haven asset.

 

Crude Oil

Oil prices remained in a tight range last week while closing last Friday session at the price of 57.41. In the earlier of last week, crude oil prices slump following the crude oil data was released. According to Energy Information Administration, U.S. Crude OIL inventories came in at 7.929M, exceeding the economist forecast at 1.515M.

However, crude oil prices managed to limit its losses amid positive prospect for trade talk. Diminishing trade war risks has placed higher optimism among investors in which it may possibly reduce the scenario for global economic slowdown. On the other hand, according to Bloomberg, uncertainties in Iraq remained amid to the widespread of anti-government protests in Iraq, which further spurred the worries across the investors and notched up the crude oil price.

 

Weekly Outlook: November 11-15

For the week ahead, investors will continue to keep a close on upcoming data such as GDP and Manufacturing Production data in United Kingdom and Reserve Bank of New Zealand’s interest rate decision that will be released this week to attain more market signals. Besides that, investors will also continue to focus on the ongoing development of Brexit and trade war news.

As for oil traders, they will be eyeing on US inventories level reported by API and EIA as well as developments in the Middle East to gauge the strength of crude demand for world’s largest oil consumer.

 

Highlighted economy data and events for the week: November 11-15

Monday, November 11  

Data

GBP – GDP (QoQ) (Q3)

GBP – Manufacturing Production (MoM) (Sep)

GBP – Monthly GDP 3M/3M Change

 

Events

N/A

 

Tuesday, November 12  

Data

GBP – Average Earnings Index + Bonus (Sep)

GBP – Claimant Count Change (Oct)

EUR – German Zew Economic Sentiment (Nov)

Events

N/A

 

Wednesday, November 13  

Data

NZD – RBNZ Interest Rate Decision

GBP – CPI (YoY) (Oct)

USD – Core CPI (MoM) (Oct)

 

Events

NZD – RBNZ Monetary Policy Statement

NZD – RBNZ Press Conference

 

 

 

Thursday, November 14

 

Data

CrudeOIL – API Weekly Crude Oil Stock

JPY – GDP (QoQ) (Q3)

AUD – Employment Change (Oct)

EUR – German GDP (QoQ)

 

Events

USD – Fed Chair Powell Testifies

 

 

Friday, November 15

 

 

Data

Crude OIL – Crude Oil Inventories

EUR – CPI (YoY) (Oct)

USD – Core Retail Sales (MoM) (Oct)

CrudeOIL – U.S. Baker Hughes Oil Rig Count

 

Events

CAD – BoC Gov Poloz Speaks