[Market Review]
U.S. oil rushes back down. Let’s look at the oil market first. Influenced by a weak dollar, declining U.S. crude oil inventories, renewed geopolitical risk, and optimistic news about vaccines, U.S. oil spent most of the week in a volatile upturn, reaching $46.23 per barrel, a new high since early March. However, by yesterday, U.S. oil had given back some of its gains and was back near the $45 mark.
OPEC+ members disagree on plans to cut production. OPEC+ will meet Nov. 30-Dec. 1 to decide whether to move forward with its plan to increase production by 2 million barrels a day, originally scheduled for January. The alliance has previously expressed a preference for postponing the increase. However, some members are divided on the issue. Iraqi officials have criticized OPEC, saying that the political and economic conditions of member countries should be taken into account before asking them to slow down their oil production activities. The recent rise in oil prices has justified the reluctance of member states to extend production cuts, particularly Iraq and the United Arab Emirates. However, an OPEC committee met on Wednesday and Thursday and concluded that if producers push ahead with production increases, global crude stockpiles will increase by 200,000 barrels per day in the first quarter. In response, OPEC’s president said that it should remain vigilant about increasing production.
The Federal Reserve may increase quantitative easing. Next, let’s focus on the dollar index. Earlier, under the influence of the beautiful U.S. PMI data, the U.S. index rose sharply, climbing as high as 92.81. However, the subsequent economic data released slightly pessimistic, the U.S. index did not get strong support. In addition, the Federal Reserve meeting minutes released on Wednesday suggest that it may strengthen its quantitative easing program at its December meeting, and the risk of the dollar being pressured to the downside is also increasing. In addition, we have to pay attention to the political news in the United States.
Gold prices are stabilizing after a sharp decline. Gold. This week, the gold price plunged $60. Vaccine advances have spurred risk appetite, leading to a decline in demand for safe-haven assets. Some investors seem intent on abandoning gold, and gold ETFs continue to drain. However, the outbreaks in Europe and the United States remain severe, and with the subsequent questionable AstraZeneca vaccine data, gold prices have pared their decline and are now trading sideways around the $1810 mark.
Silver tends to move sideways. Silver’s trend is roughly similar to that of gold. Earlier, silver prices were influenced by the positive vaccine news and started a volatile downward trend, reaching as low as $22.8 per ounce, before returning above the $23 mark and moving in a narrow range in the range.
The euro oscillated to the upside. Non-US currencies. Eurozone PMI data was upbeat, and coupled with the continued strength of the dollar, the euro was strong against the dollar for most of the week. However, German Chancellor Angela Merkel stated that public life in Germany will remain restricted for the foreseeable future. In addition, the European Central Bank signaled in the newly released minutes of its October meeting that it is gearing up to inject more monetary stimulus into the Eurozone’s sluggish economy, all of which weighed on the Euro.
The British pound is broadly volatile. Let’s look at the British pound. The pound was broadly volatile against the dollar this week, but overall the pair was still up more than 60 points. The UK Chancellor of the Exchequer, Donald Sunak, commented on the impact of the epidemic and the economic outlook in his speech, which was generally phrased in a cautious manner. In addition, he remained relatively optimistic on the issue of Brexit negotiations, but also did not give a concrete outlook for certainty.
Bitcoin went on another rampage. Finally, a look at Bitcoin. News that the U.S. Treasury Department plans to track cryptocurrency wallets’ owners and everyone involved in transactions will directly shake the cryptocurrency’s very essence – anonymity. As a result of the rumors, Bitcoin fell sharply from its highs and once fell below $16,300.
In the bond market
Overnight, the yield on China’s 10-year Treasury note rose by 0.51%, the yield on the US 10-year Treasury note rose by 0.37%, and the yield on the US 3-month Treasury note rose by 8.25%.
In the stock market
China’s stock market opened mixed, with the Shanghai Composite Index up 0.12%, the ChiNext Index up 0.2%, and Hong Kong’s Hang Seng Index down 0.23%.
[Risk Alert]
Gold: Gold ETF Outflows Risk Weakness in Gold Price
Institutional analysts point out that the progress in the development of the neocrown vaccine has boosted risk sentiment and reduced safe-haven demand, and gold has been under pressure. Some investors appear to be abandoning gold, according to some data. Gold ETFs are expected to see their first month of outflows this year after their holdings surged to record levels in October. This will put pressure on gold prices.
Euro: ECB expected to strengthen stimulus above the euro resistance 1.20
According to Westpac, the market’s hopes for a European economic recovery in 2021 outweigh the impact of the region’s epidemic blockade. In addition, investors anticipate the possibility of an easing of the ECB’s emergency purchase program and long-term refinancing operations, which would reasonably support the euro. However, the euro is unlikely to break above the 1.20 level against the dollar before the EU summit on December 10.
Pound: UOB Bullish on Pound Sterling or Pound US up to 1.3480
UOB believes that GBPUSD will try to rise to 1.3480 in the coming weeks. 1.3400 is expected to be breached today, after which it is expected to rise to 1.3440, with the next resistance at 1.3480. On the downside, initial support is at 1.3350, then 1.3315. The next resistance is at 1.3480.
[Key Outlook]
Britain and Europe to restart trade talks
Yesterday it was reported that the UK and the EU are ready to restart trade talks, after they were temporarily suspended due to the epidemic. The news said that the EU’s assessment is that 95% of the elements of the Brexit agreement have been agreed. Fishing rights, competition rules, and the manner in which the agreement will be implemented remain key areas of disagreement. The two sides are seeking agreement on limiting government subsidies to industry to prevent unfair competition.
The U.K. and the EU are also discussing the extent to which the U.K. should comply with EU social, labor, and environmental standards after the transition period ends. Another point of contention is the number of European fishing vessels that will enter British waters and the amount of fishing they will be allowed to do from next year.
Today, EU chief negotiator Barnier will meet with EU ambassadors and fisheries ministers to discuss the status of trade negotiations with the UK. If the EU hints at possible concessions on fisheries, then the pound will move higher.
Earlier, it was reported that British Prime Minister Johnson is preparing to make a major intervention in the trade talks, and he is expected to speak with European Commission President Von der Leyen in an attempt to clear the final hurdle to a Brexit deal. This week, and next week, will be the more important key points in the negotiations.
All in all, the probability of a trade deal between the UK and the EU is rising, and the market is gradually digesting this expectation, with the possibility of further upside for the pound. But be wary, once the agreement is on the ground, there may be a case of buying expectations and selling facts, beware of a sharp fall in the pound.
Also of note today is the following data.
15:45 French November CPI Monthly: previous value 0%, forecast 0.1%.
15:45 French Q3 GDP final annual rate: previous -4.3%, forecast -4.3%.
18:00 Eurozone Industrial Sentiment Index for Nov: previous -9.6, forecast -10.5.
18:00 Eurozone November final consumer confidence index: previous -17.6, forecast -17.6.
18:00 Eurozone November economic sentiment index: previous value 90.9, forecast 86.
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