[Market Review]
U.S. fiscal stimulus hopes revived. U.S. Democratic and Republican senators say they will unveil a $908 billion economic stimulus package. The resurgence of U.S. fiscal stimulus hopes has boosted risk appetite. In addition, the U.S. ISM manufacturing index in November off a two-year high, employment indicators significantly cooled, also weighed on the U.S. dollar. The dollar index plunged to a two-and-a-half-year low near the 91 level during the day. The $908 billion stimulus package, however, was vetoed by U.S. Senate Majority Leader Mitch McConnell. Last month, McConnell said he didn’t think a massive stimulus package was necessary. Federal Reserve Chairman Jerome Powell, on the other hand, acknowledged that the progress in the development of a new vaccine is good news, but he still believes that there is a high degree of uncertainty about the U.S. economic outlook and that additional fiscal stimulus may be necessary. U.S. Treasury Secretary Mnuchin, on the other hand, reiterated the need for targeted support for the economy. It appears that U.S. officials are still leaning toward an economic stimulus package, but they do not seem to agree on the size of the relief.
Gold rallied nearly $40. The dollar index fell sharply again, and market bets on a U.S. stimulus package spurred the appeal of gold and other precious metals as inflation hedges, with gold surging nearly $40 on the day to a new three-day high of $1,817.18 an ounce.
Silver rose more than 6%. Gold surged and silver climbed with it. Silver prices rose more than 6 percent during the day, once above the $24 mark, reaching as high as $24.03 an ounce, a new high since November 23.
The euro stood at the 1.20 mark. In addition to precious metals, non-U.S. currency bulls also ushered in the party. The euro rose nearly 150 pips against the dollar during the day, and stood at the 1.20 level. The euro was supported by a weak dollar and a better-than-expected overall performance of the Eurozone manufacturing sector. In addition, according to media reports, Biotron and Pfizer have applied to the European Union for a marketing license for the New Crown vaccine. It is reported that the vaccine is expected to be approved and used in the EU by the end of this year.
The British pound rose 100 points during the day. Like the euro, the pound also saw a surge. The pound climbed 100 points against the U.S. dollar during the day, reaching 1.3442. However, the latest market news indicates that the current negotiations between the U.K. and the European Union are still contentious on key issues and may not reach an agreement before the end of the week. This has limited the pound’s gains.
Oil prices continue to move lower. Finally, let’s look at the oil market. U.S. oil was volatile during the day and broke below the $45 mark. Tensions among OPEC members have raised questions about whether the organization will delay its plans to increase production. In addition, API data showed that U.S. crude oil inventories rose by 4.146 million barrels last week, a much larger increase than the market expected, which also weighed on oil prices. Although the sluggishness of the U.S. dollar index still supports oil prices, the OECD has lowered its economic forecast for 2021, making some previous medium-term forecasts for oil prices seem overly optimistic. According to some analysts, for US oil to rise above $50 afterwards, it will need more substantial economic news in addition to OPEC+’s continued belt-tightening and production cuts.
In the bond market
Overnight, the yield on China’s 10-year Treasury note rose 1.22%, while the yield on the U.S. 10-year Treasury note rose 9.71% and the yield on the U.S. 3-month Treasury note fell 1.58%.
In the stock market
U.S. stocks closed together rose, the S&P 500 index rose 1.13%, the Nasdaq rose 1.28%, the Dow Jones index rose 0.63%; to this morning, the Chinese stock market opened mixed, the Shanghai Composite Index rose 0.05%, the ChiNext index fell 0.04%, Hong Kong’s Hang Seng index rose 0.39%.
[Risk Alert]
U.S. dollar: double factors pressure the dollar index or continue to move downward
Some analysts point out that the U.S. dollar index tends to move downward in December of each year. This is because U.S. companies will remit profit funds to overseas branches at the end of the year in order to avoid taxes, and then remit them back to their home countries later in the year, and this trend will continue this year. In addition, there is great uncertainty about U.S. fiscal policy, which is also negative for the U.S. dollar. Based on this, the US Dollar Index could end the year at the 90 level.
Pound: Citi bullish on the pound next year or rise to 1.37
Citi notes that if the new coronavirus vaccine becomes widely available and a Brexit deal is reached between the UK and Europe, the pound will be supported against the dollar. Based on traditional purchasing power parity, the pound is about 15% below its long-term average. Based on this, the agency believes the GBPUSD could look to 1.37 in the next 6 to 12 months.
Bitcoin: Bitcoin Volatility Intensifies to Watch for Sharp Pullback
Institutional analysis indicates that bitcoin soared as high as $19,919 on Tuesday before diving nearly $1,000 in the short term due to skepticism about bitcoin’s strong rise. Officials at the London Digital Asset Exchange said that bitcoin may continue to charge up to the $20,000-$25,000 range, and then a new round of sharp selling will occur, with bitcoin likely to retrace 20%-30%.
[Key Outlook]
21:15 ADP employment expected to be better than previous number
First, let’s focus on the ADP employment number, which will be released in the U.S. In October, the number increased by 365,000, far below expectations, and agencies commented that the ADP number was weaker than expected, with manufacturing jobs increasing by only 17,000. Considering the worsening of the epidemic, November’s data can hardly be bright.
Some analysts predict that the US ADP employment number in November may be recorded at 410,000. If the data falls short of expectations, the dollar index may come under pressure to the downside; if it is better than expected, then the dollar index may strengthen.
It can be seen that the market does not have high expectations for the U.S. labor market, if the data is much less than expected. USDJPY may continue to be weak.
23:00 Powell expected to continue cautious stance
Moving on to the House of Representatives hearing where Fed Chairman Powell will appear. Last night, he told the House of Representatives that the outlook for the U.S. economy is highly uncertain, and that the economy may rebound strongly in the medium term due to the introduction of vaccines, but that this winter is likely to remain difficult, with a large number of small businesses at risk of closing their doors. For this reason, the Federal Reserve will use all the tools available to help the economy recover, and he also called for further fiscal stimulus. Overall, his arguments haven’t changed much. So he is still likely to emphasize tonight that the U.S. economy faces considerable uncertainty and that monetary and fiscal policy will still be needed to support the U.S. economy going forward. Just keep an eye on it.
23:30 EIA Crude Oil Inventories May Increase
Lastly, let’s focus on the oil market and take a look at the upcoming release of the US EIA crude oil inventories. Last week, the EIA crude oil inventories were released with a decrease of 754,000 barrels. This morning, the API crude oil inventories have been released, which increased by 4.146 million barrels, much higher than expected.
According to past experience, API inventory data and EIA inventory data have a strong positive correlation, so EIA crude oil inventories may also increase.
Even so, it should be noted that the current market expectations, the United States to November 27 week EIA crude oil inventories or reduce 2.272 million barrels, if the release of data more than expected, oil prices may be short term setback; if inventory data is not as expected, oil prices are expected to be stronger.
The main factor influencing the current trend of crude oil is still OPEC + General Assembly, need to pay attention to Saudi Arabia’s intention to resign as co-chairman of the Joint Ministerial Supervisory Committee, as well as Russia, Kazakhstan and the United Arab Emirates, the attitude of the three countries to postpone the increase in production.
In addition, today’s data to watch are.
15:30 Swiss CPI Nov MoM: Previous value 0%, Forecast -0.1%.
18:00 Eurozone October PPI: previous value 0.3%, forecast 0.2%.
18:00 Eurozone October unemployment rate: previous value 8.3%, forecast 8.4%.
22:00 New York Fed President Williams speaks.
23:00 Philadelphia Fed President Harker speaks.
Thursday 03:00 Federal Reserve announces the brown book on economic conditions.
Recent Comments