Along with ongoing crosscurrents regarding record increases in virus cases and more stringent lockdowns, against increasingly promising vaccine news, the mass of US data showed weakness in jobless claims but strength in durable orders and home sales. – The dollar has remained soft. Although risk appetite has waned in global markets, it hasn’t been sufficient to warrant safe haven positioning, which would have put the U.S. currency in demand.
- Geopolitical uncertainty back again! – Reports that China hasn’t really complied with the phase one trade deal and concerns over how US-China relations will develop under a new administration in Washington
- JPN225 up 0.9%, USA30 and USA500 lower on profit taking, sliding -0.58% and -0.16%, respectively,
- Defensive stocks rise – USA100 rallied 0.48% to a fresh new peak at 12,210.
- Treasuries were generally firmer as risk appetite faded.
- European stock markets are mostly lower in quiet trade,with the UK100 underperforming and down -0.5%, the GER30 down -0.06%.
- Lingering risk aversion, also fueled by Brexit headlines highlighting the lack of progress in talks weighed while the holiday in the US means lower volumes.
- Both EU and UK officials have stressed that they would prefer a deal but not at any price, so the game of chicken continues. The EU is unlikely to ever walk away from negotiations, but developments highlight that we are quickly getting to the point where an “accidental” no-deal scenario is possible, if neither side blinks and judging by track record of the whole Brexit process so far, that is unlikely to be the EU – at least on fundamental issues like the integrity of the single market, which means levels playing field rules and the governance of a deal will be central to Barnier’s mandate.
- FED: no indication of a change as soon as the December 15-16 FOMC – “immediate adjustments to the pace and composition…were not necessary”
- German GfK consumer confidence dropped back to -6.7 in December from -3.2 in November. That is a sharper than expected decline and indeed the lowest reading since July, highlighting the impact of the latest Covid-19 restrictions, which led to the closure of restaurants and bars.
- Germany has been more successful at keeping infection and mortality rates low than other European countries, but ironically that is playing into the hand of those protesting and ignoring measures that are nowhere near as stringent as elsewhere in Europe. The latest measures seemed to have helped to flatten the curve once again, but the numbers from yesterday and today have highlighted that it is too early to loosen restrictions.
Today – ECB Lane and Schnabel speech, ECB Minutes and Tokyo Inflation
Biggest (FX) Mover – EUR the biggest gainer with EURUSD at +0.22% as of 10:00– It sustains month’s gains but remains off Augusts highs. It retested its R1 earlier but the flatted fast MAs and the shrinking BB suggest consolidation or even a near term pullback. MACD and RSI also flattened .H1 ATR 0.00085 Daily ATR 0.00625