[Market Review].
On balance, the dollar index as a whole remains weak, although the intra-day trend seems to have picked up, this is because the outlook for the U.S. political situation is becoming clearer and the market is temporarily out of negative news. Investors are shifting their attention to this week’s non-farm payrolls data.
Gold is down big this week. Next, let’s focus on gold. Gold has had a relatively big drop this week. The U.S. Democrats won control of the Senate and the market expects more stimulus to come, and U.S. bond yields surged higher, keeping gold prices under pressure. Data showed that the 10-year U.S. bond yield rose strongly above the 1% mark this week, the first time since March 2020.
Silver is trading sideways after a big drop. Silver is moving roughly similar to gold. Earlier in the day, silver first approached the highs of the $28 mark, then fell sharply, dipping to $26.58 an ounce before rebounding to $27 and moving sideways at that position.
The British pound was broadly oscillating. In the UK, the surge in new coronavirus infections in the UK continues due to the new strain, for which the UK has imposed stricter blockade measures. This weighed on the pound.
The euro moved up and then down. It was almost the opposite of the dollar index. Earlier, the euro surged to 1.2349 against the dollar, and as the dollar picked up again, the euro gave back its gains and returned to around 1.2250.
The oil market is full of positive factors. Finally, let’s look at the oil market. Oil market positive factors gathered, the U.S. oil strong above the $50 mark. Saudi Arabia’s unexpected announcement that it will voluntarily cut production significantly by 1 million barrels per day in February and March has greatly supported oil prices. In addition, the reduction in U.S. crude oil inventories, coupled with rising expectations of U.S. economic stimulus, also favored oil prices. The rise of the Biden administration, however, could hit oil demand. However, this factor is not clearly reflected in oil prices at the moment.
▼Bond Market
Overnight, the yield on China’s 10-year Treasury note rose 0.8 percent, while the yield on the U.S. 10-year Treasury note rose 4.29 percent and the yield on the U.S. 3-month Treasury note fell 9.23 percent.
▼On the stock market
Overnight, U.S. stocks closed in unison, the S&P 500 rose 1.48%, the Nasdaq rose 2.56%, the Dow Jones rose 0.69%; by this morning, Chinese stocks opened in the red, the Shanghai Composite Index rose 0.04%, the Growth Enterprise Market Index rose 0.54%, Hong Kong’s Hang Seng Index rose 0.3%.
[Risk Warning
Euro: European recession is severe Euro upside space is limited
Bank of America believes that the euro further upward space is limited. The bank pointed out that the eurozone recession is more severe than most countries in the world. The long position in the euro market also makes it one of the most vulnerable to the overall market risk aversion global currencies.
British pound: the Bank of England is expected to introduce negative interest rates, the pound faces downside risks
The U.S. Democratic victory in the Georgia Senate election boosted prospects for expanded fiscal stimulus in the U.S., allowing investors to continue selling Treasuries and rising U.S. bond yields boosted the dollar. Outside speculation that the Bank of England may introduce negative interest rates earlier to counter the blow to the economy caused by the third epidemic blockade, in addition to concerns about the economic impact of the British blockade, will further depress the pound.
Yen: political uncertainty wanes U.S. and Japanese may oscillate in the range
UOB analysts pointed out that the U.S. Senate by-election results, the impact of political uncertainty weakened, the dollar against the yen will be expected to re-enter the consolidation cycle. The bank expects the US-Japan to consolidate in the range of 102.50-103.65. Because Japan’s official intention to interfere with the yen exchange rate has warmed up, which will prevent the yen exchange rate from overstrengthening. But the Fed’s continued easing and the U.S. Treasury will also expand deficit spending will limit the upside of the dollar.
Key Forecast]
21:30 U.S. non-farm payrolls data fear decadent performance
Data released last month showed that the U.S. non-farm payrolls increased by 245,000 in November, and the unemployment rate fell to 6.7%. Reuters commented that the number of new jobs will continue to fall in December or next January as more jurisdictions impose restrictions on businesses and consumers avoid crowded places like restaurants.
On Wednesday, ADP employment, known as the small non-farm payrolls, was released, recording -123,000, far less than expected and the previous value. ADP Employment Data’s vice president said that as the impact of the epidemic on the labor market intensified, December employment recorded its first decline since April 2020. Job losses were concentrated in the retail, leisure and hospitality sectors. The financial blog Zero Hedge commented that the December ADP report showed a decline in employment at both large and small businesses. The service sector saw the largest drop in employment. The market is expected to lower its expectations for December’s non-farm payrolls after the ADP release.
Currently, the market expects that U.S. non-farm payrolls may increase by 71,000 in December, with an unemployment rate of 6.8%.
In December, the U.S. epidemic did not get better, which put more pressure on the labor market, and this set of data may be very decadent. The dollar index may also come under pressure.
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