[Market Review
The Brexit deal is close at hand. It is reported that British Prime Minister Johnson is willing to accept the EU’s requirements for the fisheries sector. The framework of the UK’s trade agreement with the EU has been reached and the final text of the agreement is being finalized. With a Brexit deal close at hand, the pound stood at 1.35 against the dollar, up more than 130 points during the day. In addition to this, the threat posed by new strains of the virus is in front of the UK. The British health minister said that the three-tier restriction is not enough to control the new strain, so several areas will enter the fourth level of restriction.
The U.S. indexes shuddered to the downside. News of the UK’s Brexit deal overshadowed the threat of Trump‘s desire to revise the stimulus bill and the US indexes shook to the downside during the day. As we mentioned yesterday, Trump wants to replace the $600 check in the stimulus bill with $2,000. In response, U.S. House Speaker Nancy Pelosi plans to vote on Trump’s proposal on Thursday. In addition, the data released during the day was mixed, but had little impact on the currency market. Initial jobless claims fell unexpectedly, but remained high. A separate report showed that consumer spending fell for the first time since April. U.S. new home sales were also disappointing.
Gold prices edged higher. The dollar weakened, helping gold prices to halt the previous three consecutive trading days of decline, gold prices rose slightly during the day. Some analysts say that overall, the long-term outlook for gold remains bullish as long as the real interest rate remains negative. This is likely to hold throughout next year.
Silver is shaking higher. Silver moved roughly similar to gold, moving higher from $25 to near $25.80 during the day. Some analysts believe that the end of the year may be a good time to buy silver. Silver has a clear seasonal pattern. Data show that the probability of silver rising is highest in January and February every year, reaching 65% and 63% respectively. In contrast, the probability of silver rising in December is only 41%. From a technical point of view, silver is also more likely to rise. $23 is a solid support level for silver, which has been tested several times since September, but never broken. On the other hand, silver is currently well above its 200-day and 50-day SMAs, and the 50-day SMA is trending upward. In addition, both the RSI and MACD momentum indicators are trending higher and are not yet overbought.
The euro stands at the 1.22 handle. Moving on to the euro. The EURUSD is swinging higher and is currently trading around 1.22. This is mainly due to the weakness of the dollar index. Meanwhile, hopes for positive progress on the UK’s exit from the EU may further support the euro bulls.
The yen resumed its decline. The Japanese yen. Earlier, the USDJPY was under pressure and fell to 103.35. The pair then saw a rebound, returning to around 103.5.
U.S. oil rose 2.5% during the day. Finally, a look at the oil market. U.S. oil shuddered upward during the day, gaining 2.5%. EIA crude oil inventories recorded a decrease, injecting optimism into a market that is suffering from the aggravating impact of the new crown epidemic. In addition, the relaxation of the entry ban on the UK by France and the Netherlands has also eased market concerns considerably.
▼Bond Markets
Overnight, the yield on China’s 10-year Treasury note fell 0.48 percent, while the yield on the U.S. 10-year Treasury note rose 2.95 percent and the yield on the U.S. 3-month Treasury note fell 3.51 percent.
▼On the stock market
U.S. stocks closed mixed, with the S&P 500 up 0.07%, the Nasdaq down 0.29% and the Dow up 0.38%; by this morning, Chinese stocks opened in the green, with the Shanghai Composite Index down 0.01%, the Growth Enterprise Market Index down 0.14% and the Hong Kong Hang Seng Index down 0.01%.
[Risk Warning
U.S. dollar: the dollar is at a disadvantage, but there is the possibility of a rebound
Bank of Tokyo-Mitsubishi UFJ said that the dollar is at a disadvantage, but may rebound. Trump did not sign a new stimulus bill, and his desire to provide larger stimulus for individuals may also help provide support for the market, although Senate Republicans are unlikely to agree with Trump’s call for more stimulus. This could lead to higher risk and help the dollar rally further.
Japanese yen: monetary policy pattern is expected to maintain the U.S. and Japanese may lose 100 next year
Some analysts point out that the current “zero interest rate + unlimited QE” policy mix for the Federal Reserve will continue to pressure the dollar index. In the basic pattern of monetary policy does not change the situation, the decline of the dollar against the yen will continue to continue, in 2021 will probably lose the 100 mark, and may look down to 98.50 a line.
British pound: If the Brexit agreement is not reached, the pound is expected to plunge
The impact of the outcome of the UK-EU negotiations on the pound will intensify due to reduced liquidity in the global foreign exchange market on Christmas Eve, according to Hobart Investment Management. The company expects that if an agreement is reached, the pound may soar 3%; if the negotiations break down, it will plunge 4%. Earlier, Bank of Tokyo-Mitsubishi UFJ also said that if the Brexit agreement is not reached, the pound will fall to 1.25 against the dollar.
[Key Forecast].
Britain’s Brexit deal is expected to be reached today
Last night, EU sources said that EU member states have started preparing for the provisional application process for a new UK trade deal starting on January 1. Subsequently, it was reported that a Brexit deal is close at hand and that a framework for the UK’s trade agreement with the EU has been agreed. Frost, the UK’s chief Brexit negotiator, and Barnier, the EU’s chief Brexit negotiator, are still finalizing the final Brexit text, and there could be last-minute problems, but British sources say the likelihood of that is almost non-existent.
As for the fisheries issue, which has previously continued to be a stalemate, the UK and EU are close to reaching an agreement. Sources in the EU said British Prime Minister Johnson is willing to accept the EU’s demands for the fisheries sector.
This afternoon, the EU ambassadors will hold a meeting to be briefed on the UK’s exit negotiations. British Prime Minister Johnson is expected to make an announcement on Brexit matters at 7 p.m. BST tonight, according to The Sun.
Therefore, one needs to be alert to the possibility that the British and European sides may reach a Brexit agreement today and the pound may pull up in the short term.
But one needs to be wary of buying expectations and selling facts. If the British exit agreement is reached, then the next British epidemic will become the main factor affecting the movement of the pound, you should also pay attention to.
In addition, today is also worth watching the following data
21:30 Canadian monthly rate of construction permits in November: previous value -14.6%, forecast value 3%.
22:45 U.S. Bloomberg Consumer Confidence Index for the week ending Dec. 20: 48.4 prior.
23:30 ECRI Leading Indicator for the week ending Dec. 18: 145.8 prior.
Friday 07:30 Japanese unemployment rate for November: 3.1% previous, 3.1% forecast.
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