[Market Review]
Congress begins economic stimulus talks. The Speaker of the US House of Representatives Nancy Pelosi has invited leaders of both parties to discuss a new bail-out. Senate Majority Leader Mitch McConnell said there was an agreement “no deal, no leave Washington.” Sources said that the plan may be implemented within this week. Hopes of stimulus and vaccine optimism fueled risk sentiment and weighed on the safe-haven dollar. The U.S. dollar index.DXY was down in choppy trading, touching as low as 90.42.
Gold surged more than $20. Gold rallied more than $20 a day on hopes of a U.S. stimulus package. Td analysts said additional stimulus measures and lower yields would put real interest rates back on a downward trajectory, pushing down the dollar and boosting flows into precious metals.
Silver is up more than 2%. Gold rallied, as did silver. Silver rose sharply on the day, rising from $23.76 an ounce to around $24.50, up more than 2% on the day.
The prospects for negotiations between Britain and Europe are brightening. Then there’s the NEWS from Britain. Tory MPS say Britain is on course to strike a deal with the European Union to leave the BLOC. One of the most important shifts was Britain’s retreat from a push to renationalise fishing boats. Sterling continued to rally on the news, rising more than 180 points from its intraday low, hitting as high as 1.3468.
The euro hovered high. On the euro. A weaker dollar supported the euro. The euro hovered near a session high around $1.21. Some analysts said that the euro sideways trend may continue, the previous high of 1.2178 is an important resistance level.
U.S. oil closed up more than 1 percent. Finally, the oil market. Due to tight demand, the IEA monthly forecast, the surplus will last until the end of 2021. The IEA also said oil demand would fall by 6.2m b/d in the fourth quarter from a year earlier as a result of the new blockade. “With novel Coronavirus ravaging parts of the world and energy demand still fragile, there should be no rush to increase production early next year,” said Opec President Mohamed El-Attar. Comprehensive one-day market, the United States oil shocks up, closed up more than 1%.
▼ Bond market
Overnight, Chinese 10-year yields fell 0.39 per cent, US 10-year yields rose 1.46 per cent and US one-month yields rose 1.25 per cent.
▼ Stock market
U.S. stocks ended the day in positive territory, with the S&P 500 up 1.29%, the NASDAQ up 1.25% and the Dow up 1.13%. By this morning, The Chinese stock market had opened in a buoyant mood, with the Shanghai Composite index up 0.12%, the Chinext index up 0.2% and Hong Kong’s Hang Seng index up 0.82%.
【 Key Foresight 】
Dollar: The U.S. dollar could get a boost if the Fed stays its hand
Credit Agricole said it was aware of some of the negative effects associated with the CHANGE in THE US government and had priced it in dollars. If the U.S. fails to agree on a stimulus bill and the Fed stays on hold, global risk appetite will suffer, so the dollar could rise.
Euro: Keep bullish target on euro 1.23
Credit Agricole said it was bullish on the euro against the dollar in the medium term and could tidy up in the short term. Three factors will support the exchange rate in the medium to long term. Global growth and trade recovery, the weakening global impact of protectionism, and the EU’s 2021 budget agreement. Credit Suisse expects the euro to definitively break through 1.2155 against the dollar to resume its upward trend, with resistance above 1.2178, then 1.2215 and 1.2355. On the downside, initial support at 1.2123 and the recent low at 1.2059.
New Zealand dollar: New Zealand dollar callback or technical correction after the market or look at 0.72
Westpac notes that there is short-term technical correction demand for the New Zealand dollar, but the long-term outlook is still for further upside. The global pandemic will recede further next year and the Federal Reserve of New Zealand is likely to scale back its further easing stimulus, which will support the NZ dollar. The bank expects the NZ dollar to peak at 0.72 by the end of the year and hit 0.75 by 2021.
【 Key Foresight 】
15:00 UK CPI may strengthen in November
First up, the UK CPI figures are due to be published. The UK CPI recorded 0.4 per cent in September and 0 per cent in October. Inflation in The UK was slightly higher than expected in October, largely due to higher vegetable and fruit prices, the agency said.
In November, a summary of the relevant UK data shows that the UNEMPLOYMENT rate in the UK rose in November, the number of jobless claims increased, and the construction, services and manufacturing PMI were all higher than the previous reading and expectations. So the UK CPI may not do too badly.
Currently, the market expects the CPI to be 0.1 percent in November, and if the release is higher than expected, it could be positive for sterling. Otherwise, it would be bad for the pound.
At the same time, investors will also need to keep an eye out for annual CPI and retail price index figures released at the same time, which could strengthen the pound if they come in better than expected.
Us retail sales may record a negative monthly rate
This evening, the United States will release its monthly retail sales figures for November. The monthly retail sales rate has remained volatile in recent months, registering a 0.3 percent gain in October. U.S. retail sales fell short of expectations in October and may slow further, agency comments said. Because of the surge in COVID-19 cases and the loss of government financial support for millions of unemployed Americans, household incomes have fallen. The restrictions could lower spending, triggering another wave of unemployment and squeezing incomes further.
Currently, the market is expecting a negative 0.2 per cent monthly retail sales rate for November, and the dollar index could find support if the data meets or exceeds expectations. Conversely, the dollar index could take a hit if it falls short of expectations.
Overall, market expectations for the data are not optimistic, and the dollar index could come under pressure if the data falls far short of expectations.
Crude oil inventories may increase
Then there’s the upcoming EIA crude inventories release. EIA crude inventories, reported last week, surged 15.189 million barrels. The financial blog Zero Hedge commented that the production of gasoline and refined oil also increased sharply, and oil prices fell sharply in response. Energy analysts warn that gasoline margins will continue to struggle as demand continues to fall due to seasonality and blockade measures, with more to come.
Early this morning, API crude stocks were reported to have risen by 19.93 million barrels, much more than expected.
According to previous experience, API inventory data and EIA inventory data have a relatively strong positive correlation, so EIA crude oil inventory may also increase.
Even so, it is important to note that current market expectations for U.S. EIA crude oil inventories to fall by 3.5 million barrels in the week ending December 11 could lead to a short-term drop in oil prices if the data exceed expectations. If the inventory data falls short of expectations, oil prices could strengthen.
The Fed is expected to hold fire at 03:00 on Thursday
Early tomorrow morning, the Federal Reserve will announce its decision on interest rates. The Fed left interest rates unchanged last month. The policy statement indicated that interest rates would be kept on hold until inflation rose to 2 percent and employment was maximized, possibly changing the duration, size and composition of asset purchases if necessary.
By this month, Rabobank expects the Fed to keep interest rates low and possibly give clearer forward guidance on asset purchases. The Fed could tie it to its recently adopted flexible average inflation targeting strategy and align it with forward guidance on interest rates.
In the absence of a fiscal stimulus or rescue package, the Fed may consider providing additional monetary stimulus through asset purchases. The Fed has several options. One is to set a longer period for asset purchases through forward guidance. Second, accelerate the pace of asset purchases or extend the term of asset purchases.
Mr Powell will remain dovish at 03:30 on Thursday
Later, Federal Reserve Chairman Colin Powell will hold a press conference. Last month, he said the rise in confirmed cases was worrisome and the coming months could be challenging. There are significant downside risks to the recovery in the near term and fiscal and monetary support is still needed. The Federal Reserve will continue to provide strong support. He also called for fiscal measures. He also said the Fed wouldn’t raise interest rates until it saw actual inflation.
Taken together, we think Mr Powell will likely reiterate that there are downside risks to the economy and may take further steps to support it.
In addition, he is likely to stress the alarming nature of COVID-19 cases and call for more financial support. Overall, he is likely to remain dovish and the DOLLAR index could come under pressure.
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