[Market Review].
The dollar index returned to the 90 mark. Just this past week, the U.S. dollar index reversed the trend and returned to above the 90 mark. 10-year U.S. bond yields surged, standing at 1% for the first time since March last year, driving the U.S. index to rally. The U.S. quarterly non-farm payrolls recorded a decline of 140,000 in December. The poor non-farm payrolls data fueled expectations that the U.S. will introduce more stimulus measures.
Gold prices fell below the $1,820 mark at one point. Next, let’s focus on gold. Last week, gold prices once touched $1959.16 per ounce upward, the high since November 9 last year, but fell 4% heavily in the last trading day, once fell below the $1820 mark. While gold is often seen as a hedge against broad-based stimulus that could lead to inflation, especially in the last year, that is changing, with analysts increasingly cautious about the outlook for gold as bond yields rise and the opportunity cost of holding non-interest-bearing gold increases.
Silver has come under significant pressure. Silver is moving in a roughly similar fashion to gold. Earlier in the day, silver prices were approaching $28. However, then silver also failed to stabilize the gains, from $ 26 above all the way down to $ 24 near, down more than 10% at one point.
The British pound gave back its gains. In non-U.S. currencies, the pound opened 2021 with a new high of 1.3704 against the dollar since May 2018, but eventually closed 0.81% lower at 1.3563, giving back some of the gains recorded after the Brexit trade deal was reached. The UK’s tightened blockade measures have caused traders to focus again on the impact of the epidemic crisis. The market expects the Bank of England will introduce negative interest rate policy earlier.
The euro surged higher and retreated. In the euro, the euro once set a new high against the dollar since April 2018 to 1.2349, but as the dollar rebounded, the euro eventually gave back most of its gains, closing only 0.05% higher to 1.2223. in addition, the weak economic outlook for the euro zone, also dragged the euro. In its communiqué, the ECB noted that various economic indicators in the eurozone point to a contraction in the economy in the fourth quarter of 2020. The bank also said that vaccinations have enhanced expectations for a rapid economic recovery, although it will take time to achieve widespread immunization and a return to economic normalcy.
U.S. oil stands firm at the $50 mark. Finally, take a look at the oil market. U.S. oil has been rising rapidly recently and has now stabilized at 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 for U.S. economic stimulus, also favored oil prices.
▼Bond Market
On Friday, the yield on the U.S. 10-year Treasury note rose 3.57 percent, while the yield on the U.S. 3-month Treasury note fell 15.24 percent and the yield on the U.S. 1-month Treasury note rose 2.63 percent.
▼On the stock market
U.S. stocks closed in unison, with the S&P 500 up 0.55 percent, the Nasdaq up 1.03 percent, the Dow Jones up 0.18 percent; by this morning, Chinese stocks opened in unison, with the Shanghai Composite Index up 0.03 percent, the Growth Enterprise Market Index up 0.28 percent, and Hong Kong’s Hang Seng Index up 0.45 percent.
[Risk Warning
Euro: the euro short term risk of pullback in the year is still bullish
Bank of Tokyo-Mitsubishi UFJ believes that the euro will rise against the dollar in 2021, but short-term or pullback, is expected to end the quarter target of 1.23, to the end of 2021 target of 1.28. The agency expects that the new crown epidemic dominates the short-term outlook, will limit the euro against the dollar rally. In the second half of the year, the risk of the new crown epidemic reduced, the European economy appeared to grow, the euro will rise against the dollar during the year, but the rate of increase will be weaker than in 2020.
Japanese yen: the U.S. yen upward run or up to 104.45
Commerzbank said the dollar against the yen has broken upward three months of the lower trend line, is expected to continue to rise to eight months of the lower trend of 104.45. The pair can only fall below 102.45-104.25, there is room to fall to 101.54-100.75.
Gold: Gold’s strong period is over or hovering at 1,000.9
In its latest commodities report, Capitol Macro said that the best period for gold may be over as far as the outlook for 2021 is concerned. Gold is expected to hover around $1,900 for the remainder of 2021 before falling to $1,875 by the end of the first quarter of 2022.
[Key Outlook].
Wednesday 21:30 U.S. December CPI is hardly a bright performance
First, let’s look at the U.S. CPI data for December, which will be released on Wednesday. The data released last month rebounded, recording 0.2%. Institutional commentary said the U.S. consumer price index rose more than expected in November, as the cost of transportation services accelerated to rise. But because the epidemic continues to dampen economic activity, the
Inflationary pressures in other sectors remained moderate.
By December, the data may continue to pick up. Collating December data reveals that the ISM manufacturing PMI recorded 60.7, a new high since August 2018. the ISM non-manufacturing PMI recorded 57.2, a new high since September 2019. However, the non-farm payrolls data was not as good as expected, with non-farm payrolls adding 140,000 jobs in December, the first decrease recorded since April last year.
Currently, the market expects the U.S. quarterly CPI monthly rate of 0.4% in December, which may be positive for the dollar if the published value is larger than expected; conversely, it will be negative for the dollar.
In addition, the annual CPI rate will also be released at the same time, you should also consider a comprehensive approach and make a reasonable layout. If both sets of data are weak, gold is expected to gain support.
Thursday TBD OPEC crude oil production will continue to increase in December
On Thursday, OPEC will release its monthly crude oil market report. Last month, OPEC released its monthly report showing that OPEC crude oil production increased by 750,000 barrels per day in November from a year earlier. OPEC again lowered its forecast for global crude oil demand growth.
By December, market sources said that OPEC increased its supply by 190,000 barrels per day to 25.45 million barrels per day last December. This would be the sixth consecutive month that OPEC has increased production.
Because the epidemic continues to worsen in Europe and the United States, vaccinations have not been fully rolled out and it is expected that OPEC may continue to lower its crude oil demand forecast. Also last week, OPEC+ agreed to increase production by 75,000 barrels per day in February and March, respectively, due to higher production from Russia and Kazakhstan. But Saudi Arabia unexpectedly announced it would voluntarily cut production significantly in February and March, while other OPEC+ members kept output steady or increased it slightly. The Saudi energy minister said it will voluntarily cut production by 1 million barrels per day in the next two months. This production cut will go far to offset the joint production increases by Russia and Kazakhstan in February and March. The Saudi move shows that the country is worried about the possible impact of the resurgence of the epidemic in Europe on global oil demand, and also highlights Saudi Arabia’s determination to avoid a new price war with Russia. It also implies that OPEC’s crude oil production for February and March, could be scaled back.
Friday 21:30 U.S. retail sales fears to record a negative monthly rate
On Friday night, the U.S. will release the monthly retail sales rate for December. The monthly U.S. retail sales rate has been more volatile in recent months, recording 0.3% in October and -1.1% in November. Institutional commentary said U.S. retail sales fell for the second consecutive month in November, likely dragged down by the raging Newcastle pneumonia epidemic and falling household incomes, with growing signs that the U.S. economy is slowing its recovery from a massive recession.
Current market expectations are for a monthly U.S. retail sales rate of -0.1% in December. If the figure meets or exceeds expectations, the dollar index is expected to gain support. Conversely, if it is lower than expected, the dollar index may suffer a blow.
Overall, the market is not optimistic about the data, and if the release is much less than expected, the dollar index may come under pressure.
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