[Market Review]
The Fed remains on hold. Early this morning, the Federal Reserve announced its final interest rate decision for 2020. The Fed kept interest rates near zero, strengthened its target for bond purchases and raised its forecast for economic growth for the last three years. The dollar index rose briefly after the decision was announced. That’s because the Fed has simply changed its forward guidance on bond purchases, rather than taking steps to increase the size of its purchases or otherwise ease more aggressively. However, comments from Federal Reserve Chairman Colin Powell later pared gains against the dollar. Mr Powell said the Fed would continue to increase its holdings of Treasuries and could expand its programme of purchases to further support the economy. At the same time, Powell stressed that the U.S. economy is in dire need of a fiscal stimulus, and the recession is deeper than ever. Yesterday, U.S. retail sales posted a negative 1.1 percent monthly reading for November, the second straight monthly decline and a sign that the pace of the U.S. economic recovery is slowing.
A new US stimulus package is nearing completion. It is now reported that the United States is close to reaching a new $900 billion rescue agreement. Efforts are under way to get both the bailout bill and the government spending bill through the House of Representatives on Thursday or Friday.
Gold fell first, then rose. Gold tumbled $6 after the Fed’s decision. Still, Powell’s remarks helped gold rally. Gold rebounded about $15 from the day’s lows to trade above $1,860.
Silver jumped 4%. Silver, like gold, has rallied. Silver rose 4 percent on the day to close at $25.43 an ounce, extending its highest level in more than a month.
The pound rose before it fell. Non-us currency. In European trading, the pound stood above 1.35 against the dollar for the first time since December 4, breaking its highest level since May 2018, but then failed to sustain gains. Britain released a number of core economic data during the day. The manufacturing PMI unexpectedly surged, but the services PMI fell short of expectations, while the CPI posted a negative 0.1 percent reading, returning to negative territory after two months. The retail price index also posted a negative 0.3 per cent monthly reading, well below expectations of 0.2 per cent. This suggests a lacklustre recovery. Britain has made a key concession to leave the European Union, dropping its push to renationalise fishing boats in the brexit negotiations. The Office of British Prime Minister Boris Johnson says it expects discussions on leaving the European Union to continue in the coming days.
The euro fluctuated wildly. Take the euro. The euro fluctuated broadly during the day, hitting a high of 1.2212 earlier before falling as low as 1.2125. Against the backdrop of renewed dollar weakness, the euro once again stood above 1.22.
Oil shocks to the upside. In the oil market, API crude stocks rose 19.93 million barrels, although EIA crude stocks fell 3.135 million barrels. Oil shocks up the day. Some analysts said that as the COVID-19 vaccine has been approved and promoted in many countries, the market expects global crude oil demand to pick up.
▼ Bond market
Overnight, Chinese 10-year yields rose 0.14 per cent, US 10-year yields rose 0.96 per cent and US three-month yields rose 2.55 per cent.
▼ Stock market
U.S. stocks ended mixed, with the S&P 500 up 0.18%, the Nasdaq up 0.5% and the Dow down 0.15%. By this morning, The Chinese stock market had opened mixed, with the Shanghai Composite index up 0.01%, the Chinext index down 0.08% and Hong Kong’s Hang Seng index up 0.56%.
【 Key Foresight 】
Dollar: The Fed is less dovish than expected usd index short-term or strong
The Federal Reserve kept interest rates at zero early this morning, reinforcing its goal of keeping its bond purchases on hold. Wells Fargo notes that the Fed did not extend the maturity of its bond purchases or adjust the pace of its purchases, as many expected, giving a boost to the weak dollar. Wells Fargo is bullish on the dollar in the short term and expects a modest reversal in the euro against the dollar.
Bitcoin: Bitcoin breaks the 20,000 mark and could rise to $30,000 in the future
Bitcoin briefly rose above $21,500 this morning. The recent cryptocurrency rally has been spectacular, and investors’ enthusiasm for Bitcoin has been rekindled. Based on historical data, the greedy trading sentiment in the cryptocurrency market has been close to an all-time high recently. Some analysts even think bitcoin could reach $30,000 a coin.
Crude oil: Many factors support oil prices to continue to warm
Oil prices have been buoyed by heavy purchases by Refineries in India and China. Mizuho said oil prices would also be supported by continued increases in U.S. oil inventories and a looming U.S. stimulus package. In addition, some analysts pointed out that with the continuous promotion of COVID-19 vaccine, the market expects global crude oil demand will pick up.
【 Key Foresight 】
The Bank of England is expected to hold fire at 20:00
First up, the Bank of England will announce its decision on interest rates. Last month, the central bank left interest rates unchanged and expanded its bond purchases by 150 billion pounds.
The Bank of England is now focused on keeping the funding costs for heavily indebted governments, businesses and households as low as possible during the outbreak. The last time the Bank of England increased its stimulus was a month and a half ago, in response to the ongoing outbreak crisis.
This week, the Bank of England is likely to keep interest rates on hold and asset purchases on hold as trade talks continue between Britain and the European Union. The MPC is likely to stress the impact of a no-deal Brexit on the UK economy.
With the focus still on trade talks between Britain and The EU, sterling could continue to rise if the two sides make progress.
New CLAIMS for jobless benefits are likely to remain high
Then there’s the U.S. jobless claims report. In recent weeks, the U.S. has held above 700,000 new applications, up from 853,000 announced last week. Some agencies commented that claims for jobless benefits rose more than expected as a rise in COVID-19 infections led to more restrictions on businesses, adding to evidence that the pandemic and lack of additional fiscal stimulus were hurting the US economy.
At the moment, the market is expecting 800,000 U.S. jobless claims for the week ending December 12. If the report is much higher than expected, the dollar index could come under pressure. On the contrary, the DOLLAR index may strengthen if the reported value is less than expected.
Caution, as the number of confirmed NEW cases in the U.S. continues to surge, which could push up claims for jobless benefits, the risk of pressure on the dollar index is high.
In addition, some other data to watch today are:
15:00 Switzerland November trade account: SFr3.861 billion before.
16:30 Swiss National Bank announces interest rate decision.
18:00 Euro zone CPI Annual rate for November: previous -0.3%, forecast -0.3%.
18:00 Euro Zone Monthly CPI for November: previous -0.3%, forecast -0.3%.
21:30 The total number of new housing starts in The United States in November was annualized: the previous value was 1.53 million, while the predicted value was 1.53 million.
21:30 The total number of building permits in The United States in November: 1.544 million previously, 1.55 million predicted.
Philadelphia Fed Manufacturing Index: Former 26.3, forecast 20.
23:30 US natural gas inventory for the week of December 11: PREVIOUS -91 BCF, forecast -118 BCF.
Friday 07:30 Japan’s November core CPI annual rate: previous reading -0.7%, forecast -0.9%.
Friday 08:01 Gfk Consumer confidence index for December: former -33.
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