12 August 2019 Weekly Analysis
GCMAsia Weekly Report: August 12 – August 16
Market Review (Forex): August 5 – 9
US Dollar
Greenback was traded lower throughout the entire last week amid downbeat data from the market and escalation of trade war between China and US.
Earlier last week, dollar index received strong bearish momentum following the release of downbeat data such as ISM Non-Manufacturing PMI and JOLTs Job Openings. Both data came in at pessimistic reading of 53.7 and 7.348M respectively, weaker than economist forecast of 55.5 and 7.450M while indicating that the US economy are still haunted by escalation of trade dispute between US and China. It boosted up the market’s expectation of further rate cut by Federal Reserve in the upcoming Fed’s meeting in order to support the economy from slowing down, eventually urged the investors to threw off their dollar’s investment and flee to safe-haven asset such as gold and Japanese Yen.
On the other hand, heightened of trade war between two largest economic bodies US and China has dragged the performance of dollar index further downward. After US decided to increase the tariff of China imported goods on 1th September, China resolved to stop all the agriculture goods purchased from US as retaliation against US potent actions. Moreover, China negotiators are still expecting to convene another round of trade talk in Washington in September as both countries’ economy have been hurt badly since the trade dispute started. Besides, US President Donald Trump reiterated that Federal Reserve should have bigger and faster rate cut and cease their quantitative tightening immediately in order to support the economy development. It further heightened the market’s expectation of more rate cut will be conducted before the end of year 2019. As of now, investors are eye on more economic data from US region in order to gauge the monetary policy stance of Federal Reserve.
USD/JPY
The Japanese Yen extended its losses throughout last week while closing last Friday’s market around 105.65. In earlier last week, Japanese yen received strong bullish momentum from the market following escalation of trade war between China and US and downbeat data been released from US. Besides, Investors further increased their holdings of Japanese yen after Japan GDP data showed optimistic of reading at 0.4%, beating the economist expectation of 0.1%. It indicated that Japan overall economy outlook is still remain favorable and negative interest rate at -0.10% is sufficient to support the economy from further downturn as of now.
EUR/USD
EUR/USD successfully to extend its gains throughout last week while closing its market on Friday at 1.1200. Earlier last week, the single currency was largely bought in by the market participants amid trade tensions between US and China lifted up others market sentiment such as Euro. Nonetheless, Eurozone is still trapped in economy downturn and Eurozone Central Bank (ECB) still struggling in searching for more preventive measure such as negative interest rate and qualitative easing. As of 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 continued its bearish momentum throughout last week while closing last Friday’s market around 1.2020. Overall sentiment remained bearish for the pound market as UK continues to be haunted by Brexit issues after UK PM Boris Johnson emphasized that he will deliver Brexit by 31st October no matter the outcome. Johnson’s statement had since heightened worries that UK will leave the EU without a deal which would further dampen the economic growth for both sides. Furthermore, recent bearish data from the UK region further worsen the sentiment for the currency with UK GDP and Manufacturing Production falling below its expectations with the reading of -0.2% vs 0.0% and -0.2% vs -0.1% respectively. Investors will now focus on the G-7 meeting on 24th – 26th August where Johnson is expected to meet with French and German leaders to obtain further signals.
Market Review (Commodities): August 5 – August 9
GOLD
Gold price remain traded within a tight range while closing last Friday’s market at $1,496.10 a troy ounce. Overall demand for safe-haven assets remained strong due to lingering risks in the market such as trade war tensions between US and China and ongoing Brexit issues. Investors are now waiting for this week’s CPI data from the US to gauge the country’s inflationary level to obtain further signals regarding Fed’s future interest rate decision.
Crude Oil
Crude oil price was traded lower overall last week while closing last week market session around $54.20 per barrel. Overall sentiment for crude oil market remained dovish due to recent build up in US crude inventories with both API and EIA reporting a higher than previous inventory level.
Ongoing slowdown in global economy growth had spiraled uncertainties towards the demand for the commodity with most of the central banks announcing rate cuts to support their economical growth. Besides that, worsening trade tensions between the US and China further heightened outlook for an economy recession. Tariff imposed between the two countries had also lowered production sectors while lowering demand for crude oil in the long run.
One of the reports form the International Energy Agency (IEA) forecasted that the demand for the black commodity is expected to fall for the year 2020 after hitting its highest level in this year. They expect the demand for oil in a day to fall from 1.3M bpd to 1.1M bpd throughout these two years. Investors are now waiting for further inventories data and trade developments to gauge the oil price movements.
Weekly Outlook: August 12 – August 16
For the week ahead, investors will pay attention upon key data such as US Core CPI data and Retail Sales data to further gauge the market’s movement.
As for oil traders, they will be eyeing on OPEC report 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: August 12 – August 16
| Monday, August 12 |
Data N/A
Events N/A
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| Tuesday, August 13 |
Data EUR – German CPI (MoM) (Jul) GBP – Average Earnings Index +Bonus (Jun) GBP – Claimant Count Change (Jul) GBP – Employment Change 3M/3M (MoM) (Jun) EUR – German ZEW Economic Sentiment (Aug) USD – Core CPI (MoM) (Jul)
Events CrudeOIL – OPEC Monthly Report
|
| Wednesday, August 14 |
Data CrudeOIL – API Weekly Crude Oil Stock CNY – Industrial Production (YoY) (Jul) EUR – German GDP (QoQ) (Q2) GBP – CPI (YoY) (Jul) EUR – GDP (QoQ) (Q2) CrudeOIL – Crude Oil Inventories
Events N/A
|
| Thursday, August 15 |
Data AUD – Employment Change (Jul) JPY – Industrial Production (MoM) (Jun) GBP – Retails Sales (MoM) (Jul) USD – Core Retail Sales (MoM) (Jul) USD – Initial Jobless Claims USD – Philadelphia Fed Manufacturing Index (Aug) USD – Retail Sales (MoM) (Jul)
Events N/A
|
|
Friday, August 16
|
Data USD – Building Permits (Jul) USD – Michigan Consumer Sentiment (Aug) CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events N/A
|