Investors welcomed on Tuesday three positive news that provided clarity and better economic expectations in 2021. How did major stock markets perform? What about highly popular FX pairs like EUR/USD and GBP/USD?
A Record High
Markets soared on Tuesday on a better economic outlook thanks to the coronavirus vaccines’ updates, and what it looked like a camouflaged concession from Trump of the election result as he instructed his administration to collaborate with Biden’s to start the transition process.
The risk-on sentiment was boosted further by picking the former Fed chair Janet Yellen to become the new treasury secretary in Biden’s administration, due to her extensive experience in fiscal and monetary policy, and her support to stimulate the economy through government spending and low-interest rates.
The Dow Jones broke above the key psychological level of 30000 and as such President Trump held a two-minute press conference specifically to point out this event. Nonetheless, the risk-on sentiment remained muted on the 10 years treasury yield as it stayed below its highest levels of November.
|
Change % | |
|
+1.4% | |
|
+1.2% | |
|
+1.4% | |
|
+2.2% | |
|
+0.9% | |
|
+1.4% | |
|
+1.1% |
EUR/USD and Main FX Markets
The risk-on sentiment reduced demand on safe-haven assets including the greenback. The US dollar index slipped by 0.4% on Tuesday and hit on Wednesday a new low at 91.91 eyeing a test of the September 1 low at 91.72, a daily close below that level would change the market’s outlook to negative and may send the price to 89.45.
The EUR/USD rallied on Wednesday to its highest level in nearly three months at 1.1928 due to a weaker US dollar, a daily close above 1.1909 will change the pair’s outlook to positive. Although, eyes will be on the European leader’s video-conference meeting on Thursday to decide about the European rescue package.
The GBP/USD the market expects from the UK chancellor Rishi Sunak a cash increase for public services and more funds to help unemployed people to find work. The PM announced that the lockdown will end by the start of December although the return of the three-tier system. While markets expect that EU-UK negotiations will end eventually with an agreement especially after the Bank of England governor Bailey’s statement that a hard Brexit would cost the UK economy more than the Coronavirus. Technically, the pair’s outlook is positive and a daily close above 1.3460 could send the price even higher towards 1.3747.
Gold and Oil
The Oil price rallied further on Wednesday on increasing optimism of better global demand in 2021 thanks to the coronavirus vaccines’ breakthrough combined with expectations that OPEC+ would delay an increase in production planned for January next year. The Brent Crude hit a near nine-month high on Wednesday at $48.58 and the price could be on the way for a test of the key psychological level of $50 a barrel.
The Gold declined to a multi-month low on Tuesday and rebounded from the $1,800 level, a close below $1,796 could send the price towards $1,747o/z.
Looking Ahead
The Market will follow the US durable goods orders of October, GDP (Q3), and continuing jobless claims at 2:30 (GMT) then the US PCE index numbers of October come at 4:00 PM, and the FOMC minute will be released at 8:00 PM.
