[Market Review]
The U.S. dollar index is in a narrow range. After all sorts of optimism drove up global stock markets and led to a sharp drop in safe-haven assets, analysts said the market may have overreacted and there are still some hurdles to the introduction of the new crown vaccine. In addition, analysts at TD Securities believe that the Federal Reserve will remain ultra-loose for the foreseeable future, which may limit interest rate rises, which in turn has dampened the rise in the dollar.
Gold prices are trading around $1,880. Next, let’s focus on gold. A narrowing decline in the dollar index, a sharp rise in global risk assets, and rising U.S. bond yields are the reasons for gold’s declining appeal, and the opportunity cost of holding interest-free gold is high. However, market analysts said that despite the current new news being unfavorable for gold, uncertainty about the neo-crown vaccine remains high, and until further clarity is provided, such doubts are likely to support gold prices, which have mainly fluctuated in a narrow range around the $1,880 mark during the day, without more drastic movements.
Silver is trending steady. Like gold, silver has been steady, moving in a narrow range of $23.88-$24.47 during the day and is currently trading around $24.2.
The euro is essentially flat. In non-US currencies, the euro is essentially unchanged around 1.1820 against the dollar. EU negotiators reached an agreement on the EU’s long-term spending plan, moving further closer to finalizing the landmark €1.8 trillion budget and stimulus deal. Against this backdrop, the euro has little momentum to rise.
FXSTREET VIEW: European and US risks are biased to the downside. So what’s next for the euro?FXSTREET notes that on the 4-hour chart, EURUSD spent the day below its 20-day moving average, with momentum indicators moving lower and the relative strength index flat within negative levels. Overall, the pair has lost its bullish strength and tends to move down in the near term. For now, we can look down at 1.1780, 1.1740 and 1.1695; in case of a rebound, we can keep an eye on 1.1840, 1.1885 and 1.1920.
Sterling is a hundred pips higher. Let’s look at the pound again. The pound is a hundred pips higher against the dollar, hitting a new high since September 7 to 1.3278.The downside risk of the Bank of England imposing negative interest rates in 2021 has diminished due to the news about vaccines. In addition, investors still need to keep an eye on news related to the Brexit negotiations. Citigroup believes that the pound could rise to higher levels against the dollar.
US oil is up over 4%. Finally, to focus on the oil market, U.S. oil continues to climb, up more than 4% on the day. Analysts in the energy sector point out that the status of progress in vaccine development means that the world’s long-frozen cross-border business and leisure travel activity is expected to start thawing after this, which will be a direct positive for the outlook for crude oil demand. In addition, US API crude inventories recorded a decrease of 5.147 million barrels, which also supported oil prices. However, according to other analysts, the time has not yet come for oil prices to reach USD 50 a barrel in the face of supply-side headwinds such as a pick-up in Libyan production, but the market could regain its balance in the second half of next year.
In the bond market
Overnight, the yield on China’s 10-year government bonds rose 1.48%, while the yield on US 10-year government bonds rose 3.64% and the yield on US 1-month government bonds fell 14.98%.
▼Stock Market.
U.S. stocks closed mixed, with the S&P 500 down 0.14%, the Nasdaq down 1.38%, and the Dow Jones up 0.90%; by this morning, China’s stock markets opened all together down, with the Shanghai Composite down 0.18%, the ChiNext down 0.38%, and Hong Kong’s Hang Seng down 0.28%.
[Risk Alert]
Dollar: Fed fears to take more measures, the dollar index is expected to come under pressure
Some analysts believe that if the U.S. fiscal stimulus package can not be launched, then the Federal Reserve may surprise the market and take more initiatives to provide liquidity to the market. BNP Paribas analysts, on the other hand, believe that the dollar will fall to new lows in the next three months. The Fed is very dovish and will continue to be dovish, and the more stimulus the Fed provides, the worse it will be for the dollar.
EUR: Positive news on vaccines, euro expected to move up to 1.20
Societe Generale strategists said that positive progress in the development of the new crown vaccine means that the dollar will depreciate and emerging market currencies as well as the euro are expected to be supported. The bank believes that as the global economy recovers, coupled with the Federal Reserve keeping real interest rates steady, the dollar should fall in 2021. The euro will hold above the 1.16 support level against the dollar and could break above the annual high of 1.20 by the end of the month.
Pound: UK economic fundamentals are weak, upward pressure on the pound lingers
The pound has been supported by rising market expectations of a Brexit deal and also by progress in vaccine development. The likelihood of the Bank of England imposing negative interest rates in 2021 has diminished due to the vaccine news. While the prospect of a trade deal between the UK and the EU remains a potentially positive catalyst for sterling appreciation, the sustainability of any appreciation remains in doubt given the UK’s weak fundamentals.
[Key Outlook]
OPEC output expected to rise in October
First, come to focus on the monthly crude oil market report that OPEC will release. Last month, OPEC released its monthly report showing that OPEC’s crude oil production fell by 50,000 barrels in September to 24.11 million barrels per day. OPEC slightly lowered its forecast for global crude demand growth this year, while lowering its global crude supply forecast.
By the end of the month, the agency’s survey showed that OPEC’s crude production increased by 470,000 barrels to 24.74 million barrels in October. The main countries that increased production were Libya, Iraq and Nigeria.
The outlook for crude oil demand is expected to improve because of the positive news from the new crown vaccine, which will support crude oil. In addition, OPEC+ has started discussing a delay in increasing production and more detailed information will come out this month. In other words, oil prices still have upward momentum.
21:00 Lagarde may reaffirm that it will act in December
Tonight, ECB President Lagarde will speak. At a press conference at the end of last month, she said that the economic recovery is losing momentum faster than expected and will assess the development of the epidemic and the effectiveness of fiscal policy, expanding the scale of emergency bond purchases earlier if necessary. The ECB will consider all instruments at its December meeting and must take flexible measures.
Based on this, we believe that Lagarde will emphasize the impact of the epidemic on the economy and reiterate that further action will be taken at the December meeting. Overall, Lagarde will push up the market on the ECB in the next month to expand the scale of bond purchases is expected, please also pay attention.
Also of note today are the following data.
16:00 China October M2 money supply annual rate: previous value 10.9%, forecast 10.9%.
20:00 US weekly MBA 30-year fixed mortgage rate for Nov. 6: previous value 3.01%.
20:00 US weekly MBA mortgage application activity index for the week to Nov. 6: previous value 838.2.
21:30 ECB Vice President Guindos speaks.
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