Stock markets in Europe and the US rallied yesterday on the back of optimism surrounding vaccine hopes.
Pfizer-BioNTech and Moderna (NASDAQ:MRNA) have applied for conditional marketing approval from the European Medicines Agency. The progress being made on the pharma front has been the main driving force in the markets lately. Indices in Europe posted solid gains while the S&P 500 closed at a record level.
The US stimulus package talks are back in focus. Yesterday a group of bipartisan politicians put forward a $908 billion relief package. One Senator described it as an ‘interim’ proposal. In advance of the Presidential election, Nancy Pelosi of the Democrats and Mitch McConnell of the Republicans were very far apart with regards to working out a package. Pelosi was pushing for a $2.2 trillion scheme, while McConnell was driving for a $500 billion programme. Yesterday, McConnell talked about a $1.4 trillion package so things seem to be heading in the right direction.
In Asia, equity markets haven’t moved much and European indices are tipped to open a touch lower.
The rally in stocks yesterday put pressure on the US dollar as dealers turned their back on the greenback, which has typically been a popular safe haven play in recent months. The dollar index fell to its lowest level since April 2018.
Sterling moved higher versus the US dollar yesterday, mostly because of the dip in the greenback Towards the end of the European session it was announced that UK-EU trade delegations entered into a ‘tunnel’ – the discussions entered a more serious phase. The language used suggests that a deal could be in the offing. It was reported in the evening that the European Commission were talking down the chatter of a ‘tunnel’.
EUR/USD traded above the $1.2000 mark because of the soft dollar. The euro rallied across the board yesterday even though the eurozone headline CPI remained at -0.3%. Inflation in the currency area has been in negative territory since August. Demand is clearly subdued and that could add weight to the argument that the ECB should increase in stimulus package at this month’s meeting.
Gold and silver enjoyed very bullish runs yesterday thanks to the slide in the dollar. Both metals have been pushing lower recently so they were relatively cheap. On Tuesday, gold fell to its lowest mark since July and silver dropped to a two month low.
Copper hit a seven year high yesterday. The move was attributed to a number of factors. The Caixin survey of Chinese manufacturing showed the fastest rate of growth in 10 years, the weaker dollar and the overall optimistic mood helped the industrial metal move higher too.
Oil is in the red as OPEC+ have delayed their decision with respect to output until Thursday, even though their plan was supposed to have been made at the start of the week. Some nations want to maintain the current output levels while countries such as UAE and Kazakhstan want to increase supply.
Yesterday the major European economies posted their latest manufacturing PMI data and broadly speaking the nations saw a decline in output in November. The French update was the weakest of the bunch as it fell from 51.3 to 46.9. Meanwhile the UK reading was the best as it rose to 55.6 – its fastest rate of expansion in two years.
At 7am (UK time) German retail sales will be posted and on a monthly basis it is expected to show 1.2% growth, a rebound from the -2.2% fall in September.
Eurozone unemployment and PPI are expected to be 8.4% and -2.4% respectively. The updates will be posted at 10am (UK time).
The US ADP employment report is expected to show that 410,000 jobs were added last month and that would be an increase from the 365,000 posted in October. It will be announced at 1.15pm (UK time).
The EIA report is expected to show that oil and gasoline inventories are anticipated to be -2.35 million barrels and 2.38 million barrels respectively. The update will be posted at 3.30pm (UK time).
EUR/USD – has been in an uptrend since the start of the month and while it holds above the 50-day moving average at 1.1789, the positive move should continue. 1.2140 might act as resistance. A break below 1.1602 should pave the way for further losses.
GBP/USD – since late September it has been in an uptrend and if the positive move continues, it could target 1.3515. A pullback might find support at 1.3106, and a break through that metric should put 1.3000 on the radar.
EUR/GBP – it rebounded last week after two months of declines. A retaking of 0.9000, might bring 0.9027, the 50-day moving average, into play. A failure to move above 0.9000 could point to a continuation of the wider bearish trend. A break below 0.8864, should pave the way for 0.8800 to be tested. If 0.9000 is retaken
USD/JPY – if it holds above the 103.65 area, it could target 105.47, the 100 day moving average. Should the broader bearish trend continue and if 103.65 is taken out, it might target 102.00
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