23 September 2019 Weekly Analysis
GCMAsia Weekly Report: September 23 – 27
Market Review (Forex): September 16 – 20
US Dollar
Greenback was managed to rebound from its lowest level after a gap down in the beginning of last week amid a series of positive data and easing trade war fears.
Earlier last week, dollar index lingered around the level of 98.00 as investors keep an eye on Federal Reserve interest rate decision. Prior to the announcement, majority of the market participants generally expecting that US central bank will have a rate cut of at least 25 basis point in this meeting as recent economic data indicated that US economy is being trapped in slowdown stage, which can be seen in a significant drop of Manufacturing PMI data. In accordance, market did not exerted a strong sell off pressure on greenback as the expectation of rate cut has been digested by the market for the time being. On the contrary, dollar gained bullish momentum following optimistic view of economic outlook from Federal Reserve Chairman, Jerome Powell in the press conference. In the conference, Jerome Powell emphasized that US economy is still remain strong and resilient while no any changes on projection of inflation, which targeted on 2%.
Besides, upbeat data which released throughout the entire last week further boosted up the market participant’s demand toward the dollar index. Those positive economic data including Building Permit, Industrial Production, Philadelphia Fed Manufacturing Index and Existing Home Sales where all these data showed a higher reading while comparing to the economist forecast. In addition, the recently ended trade representative level of trade talk between China and US has showed some sign of easing in trade dispute. In the trade talk, they have discussed the issue regarding to intellectual property, purchasing agriculture products from US and the recent depreciation of Chinese Yuan. As of now, investors will continue scrutinize on further development of trade talk between both countries and more economic data in order to gauge the direction of dollar index.
USD/JPY
The Japanese Yen hovered near 107.50 throughout last week while closing last Friday’s market around 107.55. Earlier last week, the pair of USD/JPY received strong bullish momentum from the market and hit the 7 weeks high level amid positive data from US region dragged down the demand of safe haven asset, Japanese Yen. However, a neutral stance from Bank of Japan in the BoJ meeting has successfully pulled down the demand of the pair of USD/JPY as BoJ decided to remain the interest rate unchanged at -0.10% despite global growth risk has heightened. Nonetheless, they also revealed that they still have more option to further ease their monetary policy if the global economy showed an obvious growth in risk.
EUR/USD
EUR/USD extended its losses throughout last week while closing its Friday market at 1.1020 amid euro remain pressured by dovish tone from European Central Bank (ECB) and Brexit dispute. In the latest monetary policy statement, ECB’s Chairman Mario Draghi decided to cut the deposit facility rate to -0.50% from previous -0.40% while further loosening their monetary policy by implementing more stimulus such as purchase more bond from the commercial bank in order to inject money into the market starting from this year November. Investor are now keeping their eyes on more economic data such as German Manufacturing PMI from European Zone in order to gauge the further direction of euro.
GBP/USD
GBP/USD retraced from its two months highest level while closing last Friday trading session at the price of 1.2465. Pound Sterling continue to receive huge sell off pressures from the market amid Brexit uncertainty. Recently, EU President Juncker revealed that he is willing to cooperate with UK Prime Minister Boris Johnson in order to reach a deal before the Brexit deadline which is on 31th October 2019, as he comprehended that hard Brexit or no deal Brexit will definitely cause significant recession toward both countries’ economy. Besides, Ireland’s foreign minister Simon Coveney reiterated that the risk of hard Brexit has escalated as there is no any concrete draft been seen between UK and EU yet while it is clearly showing that Ireland Backstop issue are still remain unsolved.
Market Review (Commodities): September 16 – 20
GOLD
Gold price managed to extend its gains throughout entire last week while closing market at $1516.50 a troy ounce. The appeal of this yellow metal is remains strong in the commodities market amid escalation of tensions between US and Iran. Earlier last week, US President Donald Trump revealed that Iran was the leader who launched the attack on Saudi Arabia, and causing two oil production plant destroyed. After the attack on oil facilities in Saudi Arabia, US immediately announced that they will substantially increase tariff on Iran products and criticized that the attack was an ‘act of war’. Last Saturday, US government has deployed military forces to Saudi Arabia in the nature of defensive and this news triggered upward momentum in gold market.
Crude Oil
Crude oil price lingered around $58.65 per barrel after a gap up while closing its market at $60.00 following Iran’s attack on two Saudi Arabia oil production facilities.
Earlier last week, Houthi rebels claimed the responsibility for a drone attack on the world’s largest oil producer Saudi Arabia oil processing facilities. The attack has eventually disrupted the output and exports of global energy supplies, amounting to 5 million barrels per day of production had been impacted. The shutdown of oil production plant caused the oil price skyrocketed to 4 months highest level as market worries over oil supplies short in the upcoming months. However, the negative sentiment on this black commodity market has faded after Saudi Arabia’s Prince said oil production level can be recovered back to normal daily production level within 2 to 3 weeks, believingly oil production may rise back to 13 million of barrels per day in the beginning of November 2019.
Later last week, pessimistic crude oil inventories data exerted some pressure on crude oil price as data showed a stockpile in US. According to the inventory data, EIA and API inventories data came in at a reading of 1.058M and 0.592M respectively, missing the economist forecast of drop in inventory level. However, the loss of crude oil limited after recent news showed some sign of easing in trade dispute between US and China. Last week, US and China trade representatives level trade talk has ended while issues such as intellectual property and agriculture products has been brought onto the table and discussed. As of now, there is no any trade talk detail been announced yet but it seemingly uptick the market expectation on trade deal might be made in future, lifted up the future global demand on oil might recovered and even strengthen. As of now, market will continue to scrutinize on inventories data and further development of US sanction against Iran.
Weekly Outlook: September 23 – 27
For the week ahead, investors will pay attention upon key data such as GDP as well as some Home Sales 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: September 23 – 27
| Monday, September 23 |
Data EUR – German Manufacturing PMI (Sep) USD – Manufacturing PMI (Sep) USD – Services PMI (Sep)
Events N/A
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| Tuesday, September 24 |
Data EUR – German Ifo Business Climate Indeks (Sep) USD – CB Consumer Confidence (Sep)
Events N/A
|
| Wednesday, September 25 |
Data CrudeOIL – API Weekly Crude Oil Stock NZD – RBNZ Interest Rate Decision USD – New Home Sales (Aug) CrudeOIL – Crude Oil Inventories
Events NZD – RBNZ Rate Statement
|
| Thursday, September 26 |
Data EUR – GfK German Consumer Climate (Oct) USD – GDP (QoQ) (Q2 USD – Initial Jobless Claims USD – Pending Home Sales (MoM) (Aug)
Events N/A
|
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Friday, September 27
|
Data USD – Core Durable Goods Orders (MoM) (Aug) USD – Core PCE Price Index (MoM) (Aug) USD – Michigan Consumer Sentiment (Sep) CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events N/A
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