EUR/USD Price Eyes ECB Decision, GBP/USD Awaits a Decisive Meeting

By: Miguel A. Rodriguez

14:19, 09 December 2020

Stock markets rallied on a breakthrough of the long-awaited stimulus package, while EU-UK talks reached the fill or kill stage. How GBP/USD and EUR/USD trade today?

A Good Progress   

The UK withdrew controversial parts of the internal market bill that would enable ministers to override the Brexit deal treaty, in a hint that both sides are willing to avoid a disorderly Brexit at the end of the year.

The UK PM will travel to Brussels on Wednesday in a last attempt to clinch a deal with the EU before the EU summit on Thursday. Although, the last-minute deal could cover manufactured goods only, without considering the services industries like finance that make 80% of the UK economy.    

 

Another Progress  

On the other side of the Atlantic, stock markets rallied on Tuesday on news of an achieved progress on the US stimulus deal, as the US Treasury Secretary Steve Mnuchin presented a $916 billion proposal to the House speaker Nancy Pelosi, although there are some details to work on.

Miss Pelosi tweeted on Wednesday: “While it is progress that Leader McConnell has signed off on a $916 billion offer based on the bipartisan framework, the President’s proposal, which cuts unemployment insurance by $140 billion compared to the framework, is unacceptable”.

The COVID-19 relief proposal’s optimism and the early indication given from the US FDA that an authorization could be given to Pfizer’s coronavirus vaccine led the Dow Jones on Wednesday to a new all-time high at 30273 and the S&P500 broke above the 3700- level for its first time.

 

  Stock Market

Change as on December 8

S&P 500

+0.6%

Dow Jones

+0.6%

NASDQ

+0.5%

Japan 225

+0.5%

DAX 30

+0.4%

FTSI 100

+0.6%

CAC 40

+0.4%

Table source: Capex WebTrader


EUR/USD and Main FX Markets 

Markets will follow on Thursday at the ECB meeting as it is expected to release its growth and inflation forecasts for the upcoming years and to ease its monitory policy. The current low inflation levels may lead the central bank to increase the pandemic relief program (PEPP) by 500 Billion Euros and hike its open-ended quantitative easing program to 40 billion Euros a month. Additionally, a possible extension of 12 months for the TLTRO program is on the table. 

Technically, the RSI on the EUR/USD daily chart remained in overbought territory emphasizing the strength of the bullish momentum. Nonetheless, the price failed on multiple occasions to climb to a higher trading zone indicating the “wait and see” approach from bulls. That said, a daily close above 1.2148 could send the price towards the monthly resistance level located at 1.2356 (the November 2014 low).

The GBP/USD recovered some of Monday’s losses on the news of scrapping the controversial part in the internal market bill hence, the pair remained in the current trading zone 1.3185 – 1.3460 waiting for more updates from tonight’s Jonson- Von De Leyen meeting.

The RSI on the US dollar index daily chart remained in oversold territory highlighting that sellers were still in charge. A daily close below 90.44 could send the price even lower for a test of (the 30 January-2018 high).

Gold and Oil 

The oil price recovered territory on hopes of passing the new US fiscal stimulus deal and on expectations of a fall in the US production by 910K barrels per day in 2020 to 11.3 million (BPD).

On the technical side, the (RSI) on the daily price chart Brent Crude remained above 50 and signaled that the bullish momentum was still intact. Therefore, the price could rally even higher towards the high end of the current trading zone 46.53- 50.50.

The US 10-year bond yield rose on Wednesday by 1.8% highlighting a stronger risk-on sentiment, and due to the negative correlation between the Gold and bond yield, the precious metal price slipped today by 0.6%. That said, a daily close above $1,861 keeps the possibility of a rally towards the high end of the current trading zone $1,861- $1,921.

Looking Ahead

Eyes will be on Bank of Canada rate decision due at 4:00 PM (GMT) and changes in the US oil inventories at 4:30 PM and by 6:00 PM the Bank of England, financial stability report will be released.

Sources: Bloomberg, Reuters, Twitter, The Guardian

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