[Market Review].
Trump signs $2.3 trillion stimulus bill. President Donald Trump signed a $2.3 trillion new crown epidemic bailout and spending plan on Sunday, allowing millions of Americans to regain unemployment assistance and avoiding a partial shutdown of the federal government, U.S. officials said. As a result, the dollar index once fell below the 90 mark. However, the dollar saw a wave of gains into the European session.
Gold surged higher and retreated. After Trump signed the stimulus bill, gold prices got a boost for a while, breaking the $1,900 mark. Gold is seen as a hedge against a depreciating dollar and massive deficits. But as the new global crown epidemic continues to spread, risk asset markets got a boost from the aforementioned bill. Some experts believe that while the stimulus bill will put downward pressure on the dollar, favoring gold prices. But the bill’s favorable impact on gold may have already been reflected in gold prices.
Silver rose over 1.7%. Like gold, silver touched upward to $26.75 per ounce at one point on news of Trump’s stimulus bill signing, before giving back some of its gains. Still, on a combined day, silver rose more than 1.7% and is now trading near $26.50.
The British pound plunged 100 pips. In non-U.S. currencies. The British pound plunged 100 pips against the dollar during the day. Last week’s positive news about the UK-EU agreement to leave the EU has been digested. At the moment, the EU has not yet decided whether to grant the UK access to financial markets. This could trigger market confusion. The market is starting to focus on the UK’s economic outlook for the next year and whether the Bank of England will take further easing measures to bail out the economy in the post-Brexit era, which has further shifted market sentiment towards caution and a lack of confidence to continue being long the pound. Against this backdrop, the outlook for the pound is more of a wait-and-see on the progress of the epidemic and the direction of the dollar index.
The EU ambassadorial meeting adopted the UK-EU trade deal. Nonetheless, we still have to keep an eye on Brexit-related matters in case something unexpected happens. The latest news shows that the EU ambassadors agreed to implement the UK-EU trade agreement on an interim basis starting January 1, 2021. The EU Council and the European Commission are expected to formally sign the agreement on December 30, and the British Parliament will vote on the agreement on the 30th. Separately, the European Parliament’s Brexit coordination group has proposed to hold an extraordinary plenary session on February 23 to approve the UK’s Brexit trade deal.
The euro rose slightly. Another look at the euro. The euro was boosted by the UK and EU reaching a trade deal and Trump’s decision to approve a new fiscal stimulus package, driving improved risk sentiment. The euro rose slightly against the dollar during the day.
U.S. oil rose and then fell. Finally, to look at the oil market, U.S. oil rose and then fell. Trump signed the stimulus bill and the U.S. stock market rose, favoring the outlook for oil consumption in 2021. However, a global surge in new crown infections and related travel restrictions are putting pressure on the short-term demand outlook. In addition, there is resistance to higher oil prices as the market prepares for increased OPEC supply.
▼Bond Markets
Overnight, the yield on China’s 10-year Treasury note fell 0.57 percent, while the yield on the U.S. 10-year Treasury note fell 1.83 percent and the yield on the U.S. 3-month Treasury note rose 9.23 percent.
▼On the stock market
U.S. stocks closed in unison, with the S&P 500 up 0.87 percent, the Nasdaq up 0.74 percent and the Dow up 0.68 percent; by this morning, Chinese stocks opened mixed, with the Shanghai Composite Index up 0.06 percent, the Growth Enterprise Market Index down 0.14 percent and the Shenzhen Composite Index down 0.01 percent.
[Risk Warning
Gold: gold short-term bullish 1900 as an important juncture
Some analysts point out that $1900 is an important barrier to prevent gold prices from continuing to rise. With short-term bullish and medium-term bearish trend line convergence, the technical resistance level area may face challenges. If the gold price breaks above $1,900, it could reinvigorate gold bulls. On the other hand, another period of decline in the dollar could drive a strong rally in the precious metal.
Yen: If the U.S. yen rallies above 104, the downtrend may be broken
Some analysts say that if the dollar rises above 104 against the yen from around the mid-range of 103, it would break the downtrend that has formed since the spring. the downside risk in 2021 is that if cases of new crown infections continue to increase, it could cause the economy to stagnate. In this case, USDJPY would test 100. But if monetary and fiscal policies lead to an overheated economy, and if cases of viral infections suddenly subside, etc. Investors are likely to take profits on the yen in early 2021.
British pound: the United Kingdom may pass the Brexit agreement, the pound U.S. is expected to look to 1.37
Some market analysts said that five issues in the Brexit deal are still unresolved, and disputes may break out again over fishing rights, etc., but some staunch Brexiteer British lawmakers hinted that they would approve the deal. Foreign exchange analysts predict that if the pound can break through 1.36, it is expected to rise to 1.37 by the end of the year. westpac is more optimistic, predicting that the pound may rise to the 1.37-1.40 range against the dollar.
[Key Forecast].
Wednesday 05:30 API crude oil inventories are expected to decrease
Last week, API reported that US crude oil inventories increased by 2.7 million barrels, recording an increase for six consecutive weeks. The subsequent release of EIA crude oil inventories, however, decreased by 562,000 barrels.
By the end of the week, the market expects that U.S. API crude oil inventories will decrease by 2.1 million barrels for the week ending Dec. 25. If the published value is larger than expected, oil prices may come under pressure; conversely, oil prices may rise.
Recently, market expectations for crude oil demand have risen because of the continued vaccination. In addition, the passage of the stimulus bill in the U.S. is also beneficial to oil prices. However, the emergence of mutated new coronaviruses in some countries has made it possible for market concerns about the epidemic to heat up again. On balance, the oil market is in a state of play between long and short factors.
In addition, the following data are worth watching today
21:00 Canada to December 25 national economic confidence index: the previous value of 54.2.
21:55 U.S. to December 26, the week of the Red Book annual rate of commercial retail sales: the previous value of 6.5%.
21:55U.S. Redbook Monthly Commercial Retail Sales for the week ending Dec. 26: -0.9% prior.
22:00U.S. S&P/CS 20 Large Cities Home Price Index annual rate for October: 6.57% prior, 6.9% forecast.
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