[Market Review].
The US Dollar Index rose for the second consecutive week. Just this past week, although the U.S. initial jobless claims data and the non-farm payrolls report were not satisfactory, but the dollar index still recorded a second consecutive weekly positive, up a total of 0.76%.
Gold is under significant pressure this morning. Next, let’s focus on gold. The dollar is rising, suppressing the uptrend in gold prices. Gold was even more sharply under pressure this morning, once falling below the 1810 mark to touch $1802.74 per ounce, before rebounding.
Silver nearly broke the $24 barrier. The trend in silver is roughly similar to that of gold. Last week, silver was mainly oscillating around $25, and this morning it fell to $24.02 per ounce, narrowly missing the $24 mark.
The euro oscillated weaker. In non-U.S. currencies, the euro fell more than 130 points against the dollar last week, driven by a stronger dollar. In addition, the European epidemic also dragged down the euro. Data show that the number of new coronavirus infection cases in Germany has exceeded 2 million. In this context, German Chancellor Angela Merkel said that the existing blockade measures may be extended until early April.
The British pound gave back some of its gains. Let’s look at the British pound again. Last week, the pound surged to 1.3711 against the U.S. dollar at one point. the U.K. downplayed negative interest rate expectations, which greatly supported the pound. However, the impact of the epidemic on the UK still can not be ignored. Against the backdrop of the severe epidemic, the U.K. has strengthened its blockade measures. In order to mitigate the economic impact caused by the third round of anti-epidemic blockade action, British Chancellor of the Exchequer Sunac is planning to issue a one-time benefit payment of 500 pounds to nearly 6 million people.
U.S. oil rose and then fell. Finally, a look at the oil market. Just this past week, the U.S. rose and then fell before finally posting a close. A global surge in new coronary pneumonia cases and a relatively slow vaccination process weighed on oil prices. And falling U.S. inventories and rising oil prices may also attract U.S. drillers to resume vigorous production.
[Risk Warning].
Pound: UK tightens travel restrictions, cautions against downside risks to the pound
Analysts at financial website FXSTREET pointed out that the U.K. GDP released last week contracted by just 2.6% in November, better than the expected contraction of 5.7%. However, industrial output fell by 4.7% year-on-year and the merchandise trade balance recorded a deficit of 16.012 billion pounds. Also, the U.K. announced tighter travel restrictions on Friday. Technically, although the pound is still above a number of important support lines, but still can not ignore the downside risk of the pound.
Gold: Gold is facing stronger selling pressure, followed by a focus on $1,800
The dollar index has risen for the second week in a row, and gold prices are under pressure to the downside, driven by the continued rise in the dollar. FXSTREET analysts believe that gold could further test the $1,800 mark after falling below $1,820. However, if gold is able to rally to the $1,820 support level and hold that mark, gold prices could reverse the bearish outlook.
Crude Oil: Global Crude Oil Demand May Recover Oil Market to Maintain Strong Pattern
Oil producers face an unprecedented challenge to balance supply and demand against the backdrop of vaccine rollout and anti-embargo. However, ANZ notes that global crude oil demand will increase by at least 4-5 million barrels per day in mid-2021, which will more than offset the supply pressure from OPEC’s 500,000 barrel per month production increase. Therefore, the pattern of continued strength in the oil market will not fundamentally change until the summer.
Key Forecast]
Tuesday 00:00 Yellen may emphasize that the market determines the exchange rate
Early tomorrow morning, the U.S. Senate will hold a hearing on Yellen’s nomination for U.S. Treasury Secretary. According to the Wall Street Journal, people familiar with the matter said Yellen is expected to reaffirm her commitment to “market-determined exchange rates” at the meeting, making it clear that the U.S. will not seek a weak dollar to gain a competitive advantage. That is, the market will determine the value of the dollar and other currencies. The market will adjust the exchange rate to reflect changes in economic performance and generally facilitate the adjustment of the global economy.
In addition, Yellen will seek to use more accurate language to reflect long-term U.S. exchange rate policy over the past 20 years. Analysis suggests that this approach marks a return to more deliberate wording in terms of U.S. monetary policy.
Taken together, Yellen will reiterate that the market determines the exchange rate and will also make clear that the U.S. will not seek to devalue the dollar for competitive advantage. This may support the dollar index to some extent.
Wednesday 23:00 CBC likely to stay put
This week is a super central bank week, the Bank of Canada, the Bank of Japan and the European Central Bank will have announced interest rate resolutions. First, let’s see what the Bank of Canada will do on Wednesday. Last month, the Bank of Canada kept its benchmark interest rate, forward-looking guidance on interest rates, and its C$4 billion weekly bond purchase program unchanged. Emphasizing that quantitative easing will continue until the economy starts to recover, in mid-December, Bank of Canada Governor McCollum said that the downside risks to the economy are more serious and more action is needed, possibly lowering the effective interest rate floor, but the likelihood of implementing negative interest rates is low.
On balance, we expect that the Bank of Canada will keep the interest rate level unchanged at 0.25%, keep the scale of bond purchases unchanged, emphasize that the economy faces downside risks and may take more measures if necessary. The Canadian dollar is at risk of coming under pressure if the Bank of Canada’s concerns about the economic downside intensify.
Thursday 11:00 Bank of Japan may raise economic expectations
Thursday morning, the Bank of Japan will announce its interest rate resolution. In the last week, the Bank of Japan Governor Haruhiko Kuroda said that Japan’s consumer prices fell temporarily and have since gradually accelerated the pace of growth. Japan’s economy is recovering, but the economic situation is still severe, and will increase easing when necessary. In addition, sources said that they are optimistic that The Japanese government’s stimulus package can ease the blow to the economy from the epidemic, and the BOJ will probably slightly revise upward its economic forecast for the next fiscal year. Based on this, we believe that the BoJ will stay put while raising its economic growth forecast and emphasizing increased easing when necessary.
Thursday 20:45 ECB is hardly a big move
On Thursday night, the ECB will announce its interest rate resolution. Because of concerns about the rapid spread of the variant virus, several European governments announced last week that they are strengthening and extending anti-epidemic blockade restriction initiatives, and that vaccination is not expected to have a noticeable effect until mid to late spring. This has raised concerns about whether the European economy can effectively recover, but ECB President Lagarde said last week that the economy will rebound as uncertainty about the outbreak declines and that Europe has all the tools it needs to overcome this crisis. She said that as long as the restrictions are lifted by the end of March, the ECB’s forecast for an economic rebound this year still stands.
Current institutions generally expect that the ECB will keep the three key interest rates unchanged and will not continue to increase the quantitative easing program for the time being. However, considering the severe public health situation, the ECB may consider future adjustments to the monthly anti-epidemic bond purchase program.
Recent Comments