This week’s events at a glance
①Britain and Europe officially “break up”, this week there are two big hurdles to break
The leaders of the United Kingdom and the European Union finally reached a historic Brexit trade agreement on Friday, the “annual breakup drama” Brexit finally came to an end, but it is still not completely over. This agreement still needs to break several hurdles this week.
On Monday at 17:00, the leaders of the European Parliament will meet to discuss the results of the EU-UK negotiations, with both European Commission President von der Leyen and EU Brexit negotiator Michel Barnier in attendance.
Meanwhile, EU ambassadors have started to consider the agreement on December 25 and are expected to take 2-3 days to make a decision. However, in order to avoid unnecessary economic disruptions, the agreement must first be approved by the 27 EU member states by December 31 before it can be temporarily implemented without the consent of the Parliament.
And the European Parliament will accept the agreement provisionally on January 1 next year, but will continue to deliberate. In a statement, European Parliament President David Sassoli said.
“The Parliament has been clear about the red lines from the beginning and has worked closely with Barnier throughout the negotiations, but there is no guarantee that it will be approved by the Parliament. If the European Parliament decides to approve it, it will closely monitor the implementation of the agreement.”
One more big hurdle is that the British House of Commons will vote on the Brexit trade deal at 17:30 on Wednesday.
News site Al Jazeera expects British MPs to approve the deal, as Prime Minister Johnson’s ruling Conservative Party has a sizable majority in Parliament, while the opposition Labour Party has confirmed it will back the Brexit deal as the only alternative to the chaos of a no-deal Brexit.
② Trump signed it! Will there be more bailout plans next year?
The U.S. White House confirmed Monday morning that President Donald Trump signed a new $900 billion crown bailout bill and government appropriations bill. According to the Labor Department, without Trump’s signature, about 14 million people could have lost their unemployment benefits from this week.
But it’s not just the progress of the bailout plan that’s affecting the market right now, there’s also the effectiveness of vaccines against mutated viruses, and the Georgia Senate runoff scheduled for Jan. 5, which has also begun to affect market sentiment.
If the Democrats take control of the Senate, investors could change their views on the U.S. economy and the stock market. Trump said he will go to a Senate campaign rally in Georgia on Jan. 4.
③ OPEC+ is poised to take back the steering wheel of the oil market, production increase or decrease?
This Sunday, OPEC meets with the Ministerial Oversight Committee of non-OPEC oil-producing countries.
This comes after OPEC and its allies agreed to meet monthly going forward in early December, with Saudi Energy Minister Salman saying that more frequent OPEC+ meetings mean that it will be policymakers in oil-producing countries, not speculators, who will drive the oil market in the months ahead. Saudi Arabia and Russia have also reaffirmed their commitment to cutting production.
But some OPEC members appear to be acting alone. According to the Islamic Republic News Agency (IRNA), Iran plans to double its crude and condensate production to 4.5 million barrels per day (bpd) and increase exports to 2.3 million bpd from March 21 next year if current U.S. sanctions are lifted. This would conflict with OPEC’s efforts to gradually increase production to stabilize the market.
In addition, officials said Russia still plans to support continued production increases at Sunday’s meeting. The Russian government now considers it reasonable to increase production by 500,000 bpd in February next year, the same as the consensus agreement to increase production in January.
This figure would be the maximum production increase agreed in the previous agreement, a decision that would of course be subject to the agreement of other countries. A new round of restrictions could put pressure on the recovery in global crude demand after the British government completely blocked London and southeast England.
[Hot Species Outlook].
①Gold is expected to see a return of funds at the end of the year, with two major resistance above
The epidemic has killed nearly 330,000 people in the U.S., with the number of deaths constantly exceeding 3,000 per day, the highest level since the epidemic began. According to The Guardian, more than half of the total 3,100+ U.S. counties will see more deaths than newborns due to the New Crown epidemic pandemic, the first time in U.S. history, and life expectancy per capita will drop by 3 years.
The epidemic has spawned risk aversion, which is a positive for gold. In addition, Blue Line Futures chief market strategist Phillip Streble said investors tend to use the last week of the year to take stock, where investors will close out stock market profits and reinvest in safer assets, which will be good for gold prices. And from a seasonal perspective, gold also tends to perform well in late December and early January.
Hussein Sayed, chief market strategist at FXTM, also said.
“Gold could see significant inflows in the final days of 2020 if asset managers want to lock in some of their profit-taking and reduce portfolio risk.”
As a result, Anna Golubova, an analyst at Kitco News, believes that gold could end up touching $1,900 this week. Jim Wyckoff, senior analyst at Kitco, adds.
“Gold’s first resistance for the week is seen at $1,889.40 and then $1,900, while the first support below is seen at last week’s low of $1,859 and then $1,850.”
② Is oil price rising too fast as new toxic strain spreads fast?
International oil prices dipped for two days last week on news of a new variant of the New Crown virus, but then rebounded on the happy news of Brexit.
In fact WTI and Brent crude futures have risen sharply since the end of October, with crude traders seemingly less interested in the global surge in cases and more focused on the vaccine. But the new strain appears to be spreading faster than the vaccine, having already hit the U.K., Nigeria and other countries.
Andrew Lipow, president of U.S. oil consultancy Lipow Oil Associates, warned that the impact of the outbreak is a major driver of the oil market, despite the supportive nature of the Brexit deal. A “black swan” event could follow in the short term, negatively impacting oil prices or at least inhibiting them from rising. In addition, if Russia is firm on increasing production, be wary of short-term volatility in the oil market.
Fx Empire analyst Christopher Lewis believes that there is plenty of support for WTI crude oil prices at the $44 level this week. And while the $50 level will be tested again in the short term, the lack of demand may eventually become an issue. Brent crude may get strong support at $50 and the 50-day average tends to reach the $50 level, but $55 may become a resistance level.
③Dollar may weaken across the board, 91.10 blocked
According to foreign media reports on the 25th, data from the International Monetary Fund (IMF) showed that the U.S. dollar’s share of foreign exchange reserves reported to it fell to 60.4% in the third quarter from 61.2% in the second quarter. The U.S. dollar still accounts for the largest share of foreign exchange reserves held by central banks around the world. A year ago, the dollar accounted for 61.5% of global foreign reserves, a share that has fallen for two consecutive quarters.
With last week’s good news on the UK’s Brexit deal pushing the pound higher against the dollar overall, and the price action of the euro against the dollar being influenced by the pound’s strength, the possibility of an overall weakening of the dollar could emerge and the dollar’s recent rally attempt could fail.
DailyFX analyst Rich Dvorak pointed out that the US index may have resistance around 91.10 this week, on the other hand, the sell-off may lead the US index back to the monthly low of 89.80.
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