[Market Review
Britain and Europe reached an agreement. The British and European sides released a detailed official note confirming that a Brexit deal has been reached. The British pound surged up to the 1.36 mark against the U.S. dollar in the short term, then gave back some of its gains, and the market is still on the sidelines. Although the agreement is finalized, but the process of leaving the EU is far from over.
On the EU side, the European Parliament does not have time to complete a proper review of the agreement before the end of the year as the protracted negotiations did not reach an agreement until the last minute. To avoid unnecessary economic disruptions, the European Parliament will provisionally accept the agreement on January 1 next year, but will continue its deliberations. And this afternoon, the EU ambassadors will meet. We can keep an eye on it. In the U.K., the British Parliament will vote on the trade deal on Dec. 30.
A new round of U.S. stimulus bills is blocked. The UK-EU agreement to leave the EU has hit demand for the safe-haven dollar. In addition, the stimulus bill was blocked, which also brought more uncertainty to the dollar. In the new stimulus bill, President Donald Trump wants to give out $2,000 checks to Americans instead of $600. For this reason, the House of Representatives tried to pass this $2,000 package in a short form session on Christmas Eve, but this was rejected by House Minority Leader McCarthy.
Gold is in a narrow range. Moving on to gold. Gold has oscillated in a narrow range this week. The market is weighing the impact of multiple short and long factors on the gold price. On the one hand, the progress of the British-European negotiations makes the market risk aversion is suppressed; on the other hand, the weakness of the dollar provides partial support to the gold price.
Silver is consolidating sideways. The trend of silver is roughly similar to that of gold. Earlier, affected by the discovery of new strains of poison in the United Kingdom, silver once broke through the $ 27 mark, and then retracted the gains, and is now trading sideways around $ 25.7.
The euro is broadly oscillating. Let’s look at the euro again. The euro oscillated widely this week, although once below the 1.2130 mark, but benefited from the weak dollar, the euro has performed quite well this week. At the same time, the UK and Europe reached a trade agreement, also gave the euro some support.
U.S. oil rose and then fell. Finally, take a look at the oil market. The emergence of a new strain of coronavirus in the UK could lead to the implementation of more anti-epidemic blockade measures in Europe. This will slow down the recovery of global oil demand and put pressure on oil prices, with U.S. oil once dipping to the $46.1 mark.
But then U.S. oil recovered lost ground, as the EIA crude oil inventories recorded a decrease, injecting optimism into a market that is suffering from the increased impact of the new crown epidemic. The oil price was also supported by the weakening of the dollar as a result of the Brexit deal reached between the UK and Europe. In addition, the relaxation of the entry ban on the UK by France and the Netherlands has also eased market concerns considerably.
▼Bond Market
Overnight, the yield on China’s 10-year Treasury note rose 0.97 percent, while the yield on the U.S. 10-year Treasury note fell 2.65 percent and the yield on the U.S. 3-month Treasury note fell 2.41 percent.
▼On the stock market
U.S. stocks closed in unison, with the S&P 500 up 0.35 percent, the Nasdaq up 0.26 percent and the Dow up 0.23 percent; by this morning, Chinese stocks opened in the green, with the Shanghai Composite Index down 0.34 percent, the Growth Enterprise Market Index down 0.33 percent and the Shenzhen Composite Index down 0.26 percent.
[Risk Warning
British pound: the Brexit drama came to an end British pound downside riskiness
Sources close to the matter said that after the UK and Europe reach a post-Brexit trade agreement, the two sides may renegotiate if there is an unresolvable dispute or if they wish to change the terms of the agreement. This would mean that Brexit could become a permanent battleground in British politics. In the coming months, Scotland may intend to secede from the UK. This could all be a drag on the pound.
Gold: If the stimulus bill is landed Gold is expected to rise
Some insiders said that despite the setback in the U.S. stimulus plan consultation, the likelihood of the plan passing at some relatively soon point is high, which supports gold prices to some extent. In addition, some analysts said that the UK’s exit from the EU trade deal was reached, paving the way for a weaker dollar, which in turn boosted gold; if the impasse on the US stimulus package breaks, gold prices could rise further.
Silver: Supply may be in short supply Silver is expected to climb sharply
Saxo Bank said green energy demand will push up silver prices to $50 an ounce. Rising inflationary pressures, low interest rates leading to a weaker dollar, industrial demand and the green energy revolution are among the many factors that may significantly push silver prices upward. Silver is needed for the production of photovoltaic cells used in solar panels. 2021 may also see a supply shortage of silver.
Key Outlooks
Crude oil demand outlook is not optimistic
This week’s release of EIA crude oil inventories recorded a decline, sliding to the lowest level since the end of November last year, and gasoline inventories also recorded a larger decline. Investors also welcomed a possible Brexit trade deal in the UK.
But oil prices did not move higher, as another mutated strain of New Coronavirus was detected in the UK and the first case of mutated New Coronavirus was seen in Germany. This forced the European market to impose restrictions on European as well as British personnel. This in turn has put pressure on energy demand.
On the supply side, the number of active oil and natural gas rigs at U.S. energy companies rose for a fifth straight week this week as higher energy prices prompted producers to keep increasing production in recent months. U.S. energy services firm Baker Hughes reported that active oil and natural gas rigs in the United States rose sharply from a record low in August.
In addition, Libyan oil production capacity returned to 1.28 million barrels per day, an 18-month high. UAE Energy Minister Mazrui expects oil production to gradually recover in 2021.
On balance, market investors remain concerned about the outlook for crude oil demand and there are downside risks to oil prices.
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