[Market Review]
U.S. indices are volatile and falling. Last week, the US dollar index as a whole was lower, and positive news about vaccines came out several times, and the market risk sentiment continued to warm, suppressing the safe-haven US dollar. In terms of economic data, the U.S. retail sales rate for October, released last week, was 0.3%, lower than expected and significantly lower than the previous value of 1.6%; while initial jobless claims were recorded at 742,000, higher than expected. Overall, the data show that the level of consumer spending in the U.S. is falling and the employment situation is not optimistic. However, a new round of economic stimulus talks remains stalled. To this end, Treasury Secretary Nuchin proposed that unused Fed relief funds be used as part of the new stimulus package.
Gold traded on weakness. The U.S. indexes are volatile and falling, as is gold. Gold prices plunged $18 last week. Vaccine optimism, as well as the continued lack of U.S. fiscal stimulus, weighed heavily on gold prices in the short term. However, in the long term, a further slowdown in the global economy and a sharp rise in global debt problems, coupled with the fact that central banks around the world are still maintaining extremely accommodative policies, has given gold prices medium-term momentum.
Silver is lower overall. Last Monday, the price of silver touched the $25 mark, and then fell all the way down, once as low as $23.62 last Thursday, and then picked up.
The euro climbed slightly. Non-US currencies. Last week, benefiting from the weak dollar, the euro against the dollar volatility climb. However, the European contagion continues to worsen, limiting the euro’s upside. In addition, we also need to watch the progress of the EU’s long-term budget program. Following the rejection of the budget package by Hungary and Poland, EU leaders held further consultations at a special summit to fight the epidemic, but still did not reach a consensus. However, they said they will still try to negotiate.
FXSTREET VIEW: Risks in Europe and the US are skewed to the upside. So what’s next for the EUR? FXSTREET notes that on the daily chart, EURUSD is above its 20-, 100- and 200-day moving averages. The risk bias for the pair is to the upside. At the moment, we can go up to 1.1885, 1.1920 and 1.1965; if there is a pullback, we can watch out for 1.1810, 1.1770 and 1.1720. The pound is above the 1.33 level.
The British pound is above the 1.33 level. Let’s look at the British pound. A weak dollar, coupled with optimistic expectations of Brexit negotiations, pushed the pound up. The pound has now broken above the 1.33 level against the dollar. Confidential documents obtained by Sky News show that EU officials believe that the Brexit deal is 95% agreed, but the documents also show fears of a breakdown in negotiations. The U.K. and Europe remain at odds on three recognized areas: fisheries, governance and competition rules.
U.S. oil is swinging higher. Finally, a look at the oil market. Last week, U.S. oil was volatile and climbed by 5%. The rise in oil prices was largely supported by good vaccine news and hopes that OPEC would delay production increases. However, OPEC has not given a clear answer on the delay in increasing production, we need to be cautious. In addition, according to some analysts, oil prices still face downside risks due to the failure of US fiscal stimulus talks and the still serious global epidemic.
Debt Market
Last Friday, the yield on China’s 10-year Treasury note fell by 0.37%, while the yield on the US 10-year Treasury note rose by 0.58% and the yield on the US 3-month Treasury note fell by 15.42%.
On the Stock Market
U.S. stocks closed down, with the S&P 500 down 0.68%, the Nasdaq down 0.42%, and the Dow Jones down 0.75%; by this morning, China’s stock markets opened up, with the Shanghai Composite Index up 0.19%, the ChiNext Index up 0.38%, and Hong Kong’s Hang Seng Index up 0.79%.
[Risk Alert]
Pound: Credit Suisse Bullish Pound may rise to 1.3473
On the downside, immediate support is at 1.3240, followed by 1.3193, with stronger support at 1.3166.
The Swiss franc: major central banks to maintain easing, the Swiss franc is expected to continue to strengthen
The Bank of Tokyo-Mitsubishi UFJ believes that the Biden victory supports the expectation of a weaker dollar. In addition, the Federal Reserve is expected to increase monetary easing to support the economic recovery. The Swiss franc, like the gold price, has been a major beneficiary of the dollar’s depreciation trade. It is unlikely that global monetary policy will be tightened due to the impact of the neocrown epidemic, and the Swiss franc will continue to strengthen.
The New Zealand dollar: New Zealand’s economic outlook is improving, and the New Zealand dollar may be stronger in the short term.
According to ANZ, New Zealand’s ability to withstand short-term shocks in overseas markets has improved, which may drive the New Zealand dollar higher against the U.S. dollar. The short-term outlook for New Zealand’s economy is better, and the market’s expectation of negative interest rates implemented by the New Zealand Federal Reserve is gradually weakening, and the New Zealand dollar faces upside risks against the U.S. dollar. In the technical view, support at 0.6805, resistance at 0.6970. The New Zealand dollar is the most popular currency in the world.
[Key Outlook]
Wednesday 21:30 US Q3 GDP to remain strong
First of all, let’s focus on the revised third quarter GDP that will be released in the US. Since the beginning of Q3’18, the overall US GDP has weakened, recording -31.7% in the second quarter of the year. At the end of last month, the preliminary third-quarter GDP rate was recorded at 33.1%. Some market analysts believe that the U.S. economy rebounded from the epidemic-induced plunge in the third quarter with a record annual growth rate of 33.1%, but the recovery is incomplete and the economy is still below the level of the end of 2019.
Currently, the market expects the U.S. third quarter real GDP annualized quarterly revision of 33.1%, if the published value is better than expected, or good for the U.S. dollar index; otherwise, or bad for the dollar index.
If the revised value is revised downward, the USDJPY will be under downward pressure. Also, keep an eye on the initial jobless claims, which will be released at the same time.
Wednesday 23:00 U.S. October PCE data is expected to decline
The PCE data will be released in the U.S. In July and August, the annual rate of PCE data picked up and fell to 1.5% in September, in October, the data may fall further, finishing the October data can be found, although the total number of new housing starts is higher than expected, manufacturing production accelerated, but retail sales and CPI are less than expected.
Currently, the market is expected to the U.S. core PCE price index in October at an annual rate of 1.4%, if the published value is better than expected, or good for the U.S. dollar; if the published value is not as expected, or bad for the U.S. dollar.
Also keep an eye on the PCE monthly price index and personal spending monthly rate that will be released at the same time. You need to pay attention to the impact of this set of data on the dollar index.
Thursday 03:00 Fed minutes are expected to be dovish
Finally, let’s focus on the minutes of the Federal Reserve meeting that will be released. At the beginning of the month, the Fed left its benchmark interest rate unchanged at 0%-0.25% and did not change the pace of bond purchases in the Fed’s FOMC statement. The Fed also indicated that it would adjust its monetary policy stance appropriately if risks arose that could impede the achievement of the Fed’s objectives, and that it might change the duration, size, and composition of its asset purchases if necessary. The Fed also intends to make adjustments to its economic expectations in December. In addition, the Fed is calling for fiscal support.
On balance, the Fed minutes may reveal that the Fed may adjust its asset purchase program as well as its economic expectations. It is more likely that the minutes will be dovish, and there is a risk that the USDJPY will come under pressure.
Also of note today are the following data.
Monday 16:15 France’s preliminary manufacturing PMI for November: previous value 51.3, forecast 50.1.
Monday 16:30 German Nov manufacturing PMI preliminary value: previous value 58.2, forecast 56.5.
Monday 17:00 Eurozone November manufacturing PMI preliminary value: previous value 54.8, forecast 53.1.
Monday 17:30 U.K. November manufacturing PMI: previous value 53.7, forecast value 50.5.
Monday 17:30 UK November services PMI: previous value 51.4, forecast 42.5.
Monday 22:45 U.S. Markit preliminary manufacturing PMI for November: previous value 53.4, forecast 53.
Monday 22:45 Markit preliminary services PMI November: previous value 56.9, forecast 55.3.
Wednesday 05:30 US – November 20 API crude oil inventories for the week: previous value of 4.174 million barrels.
Wednesday 21:30 U.S. initial jobless claims for the week of November 21: previous value 742,000, forecast 730,000.
Wednesday 23:00 U.S. October core PCE price index monthly rate: previous value 0.2%, forecasted 0%.
Wednesday 23:30 US EIA crude oil inventories for the week ending November 20: previous value of 769,000 barrels.
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