29 July 2019 Weekly Analysis
GCMAsia Weekly Report: July 29 – August 2
Market Review (Forex): July 22 – 26
US Dollar
Greenback was traded higher last week while closing Friday’s market at around 97.66 following positive economic development in the US.
Earlier last week, dollar index was pressured by bearish housing data with both Existing Home Sales and New Home Sales falling below expectations with the reading of 5.27M and 646K against forecasted of 5.35M and 660K respectively. However, dollar was supported by bullish momentum after the release of positive Core Durable Goods Orders and GDP data. Core Durable Goods Orders was growing up by 1.2% against its forecasted value of 0.2% while the second quarter GDP growth was 2.1%, exceeding economists’ expectation of 1.8%. Investors expected that both data would reduce the possibility of an aggressive rate cut by US Federal Reserve (Fed) during its policy meeting this week.
However, gains on dollar was also limited due to the mixed signal from US economy in terms of slow down in inflation and housing sectors where investors worried that the Fed will cut their rate for more than once throughout the year 2019. Investors are now expecting a 25-basis point rate cut from 2.50% to 2.25% this Thursday while focusing on Fed’s monetary policy statement as well as press conference led by Fed Chairman Jerome Powell to obtain further insight on future policy stance to gauge the dollar’s movement.
USD/JPY
The Japanese Yen extended its losses throughout last week while closing Friday’s market around 108.60. Although economic data from Japan was showing positive signs in terms of its upbeat Tokyo Core CPI data, investors confident towards the safe-haven Yen was limited as Bank of Japan (BoJ) is widely expected to keep their low-interest rate level unchanged to support Japan’s economy which is still pressured by global economy slowdown. Investors will now focus on BoJ’s policy meeting this week to obtain further signal.
EUR/USD
EUR/USD extended its losses throughout last week following a set of bearish economic data and dovish signal from European Central Bank (ECB). The euro was largely sold following the release of poor German Manufacturing PMI and Ifo Business Climate Index with a reading of 43.1 and 95.7 against its forecasted value of 45.1 and 97.1. The bearish data further heightened expectations of monetary policy loosening by ECB through rate cuts or continuation of their Quantitative Easing (QE) program. However, the single currency managed to pared its losses after ECB’s interest rate decision. As expected, they kept their interest rate unchanged at 0.00% last week while emphasizing to further loosen its monetary policy and take necessary actions if inflation continues to fall below expectations. For 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 plummets throughout last week while closing last Friday trading session at the price of 1.2380. Pound sterling continue to suffered huge losses as Brexit fears dragging market confidence to a new low. Recently, lead candidate Boris Johnson have officially named as the new Prime Minister of UK. However, the nomination added further pressure and risk of no deal Brexit following Boris Johnson was known as a hardline Brexiteer. Besides that, in just one week after he was elected as the prime minister, he has clashed with European Union, demanding the previous agreement to be rewritten and vow to take UK out of the EU before October 31, regardless of the outcome. President of the European Commission Jean-Claude Juncker also told Boris that the agreement with the ex-prime minister Theresa May was the only and the best choice. The dispute between U.K and EU and unable to reach a deal could potentially cause U.K economy in a downward spiral in the long term and thus causing investors to flee from the risky pound sterling.
Market Review (Commodities): July 22 – 26
GOLD
Gold price remain traded within a wide range while closing last week’s market at $1418.26 a troy ounce. The sentiment of safe-haven metal remains mixed as market continue to speculate on Fed rate cut. Despite that, the commodity starting slowly to lose its value as stronger dollar continue to boost market confidence with its upbeat data and trade optimism, despite Fed rate cut expectation. Market will now wait for Fed decision to gain further confirmation and the direction of the commodity.
Crude Oil
Crude oil price was traded flat but remain pressured throughout last week while ending last week market session with the price $56.15 per barrel. Despite last week data showed a major drop in its supply, the commodity was unable to regain any confidence of investors.
According to analyst, the huge shortage in the inventories are due to the closure of oil rigs along the Mexican waters that was hit by hurricane Barry. However, the losses suffered by the commodity was limited due to the heightening tension between Iran and UK as well as U.S. Previously, Iran had seized a UK oil tanker in its waters in response to a previous UK action.
The increasing tensions can trigger a potential war near the Middle East waters. These waters are used as the main route for shipping oil stocks to other countries around the world. Due to lack of developments for now, Investors will continue their monitoring of global supply levels and issues in the Middle East for further signals.
Weekly Outlook: July 29 – August 2
For the week ahead, investors will pay attention upon key data such as Fed’s monetary policy meeting as well as Friday’s Nonfarm Payroll data to further gauge the market.
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 29 – August 2
| Monday, July 29 |
Data JPY – Retail Sales (YoY) (Jun)
Events N/A
|
| Tuesday, July 30 |
Data JPY – BoJ Interest Rate Decision EUR – German CPI (MoM) (Jul) USD – Core PCE Price Index (MoM) USD – CB Consumer Confidence (Jul)
Events JPY – BoJ Monetary Policy Statement JPY – BoJ Outlook Report JPY – BoJ Press Conference
|
| Wednesday, July 31 |
Data CrudeOIL – API Weekly Crude Oil Stock CNY – Manufacturing PMI (Jul) AUD – CPI (QoQ) (Q2) EUR – German Retail Sales (MoM) (Jun) EUR – German Unemployment Change (Jul) EUR – CPI (YoY) (Jul) EUR – GDP (QoQ) EUR – Unemployment Rate (Jun) USD – ADP Nonfarm Employment Change (Jul) CAD – GDP (MoM) (May) CrudeOIL – Crude Oil Inventories
Events N/A
|
| Thursday, August 1 |
Data USD – Fed Interest Rate Decision CNY – Caixin Manufacturing PMI (Jul) EUR – German Manufacturing PMI (Jul) GBP – BoE Interest Rate Decision (Aug) USD – Initial Jobless Claims USD – ISM Manufacturing PMI (Jul)
Events USD – FOMC Statement USD – FOMC Press Conference GBP – BoE Gov Carney Speaks
|
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Friday, August 2
|
Data AUD – Retail Sales (MoM) (Jun) GBP – Construction PMI (Jul) USD – Average Hourly Earnings (MoM) (Jul) USD – Nonfarm Payrolls (Jul) USD – Unemployment Rate (Jul) USD – Michigan Consumer Sentiment (Jul) CrudeOIL – U.S. Baker Hughes Oil Rig Count
Events JPY – Monetary Policy Meeting Minutes
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