Optimistic Outlook
The coronavirus vaccine’s optimism and an over 1$ Trillion stimulus package expectations have helped current risk-on sentiment to remain intact, despite concerns of a further contraction in Europe and the UK economies caused by the recently imposed partial lockdowns in France, Germany, and England. Additionally, American cases are still in an upward trend.
This could lead investors to favor risker assets such as equities and corporate bonds versus treasury bonds, especially if Republicans keep the Senate majority which means a lower possibility of tax and regulation increase.
Additionally, the market cheered the Asia-Pacific agreement signed on Sunday according to that deal China, Japan, and 13 Asian economies agreed to reduce future tariffs.
Equities Edge Higher
Asian equities traded higher on Monday on strong Japanese and Chinese data releases. The Japanese GDP (Q3) of 21.4% came in better than expected of 18.9%, while the Chinese industrial production of 6.9% came in better than expected of 6.5%.
The story in the US was not much different, as major stock markets opened with an upward gap on Monday driven by news that the US President-elect, Joe Biden, opposes a total lockdown and prefers “European style” lockdown targeting specific activities.
|
Change % | |
|
+1.3% | |
|
+1.3% | |
|
+0.8% | |
|
+0.8% | |
|
+1.1% | |
|
+0.8% | |
|
+1.3% |
EUR/USD and Main FX Markets
The US Dollar index opened with a downward gap reflecting a stronger risk-on sentiment in the market. That said, the technical outlook of the market remains neutral while above 91.72.
The EUR/USD failed twice last week to close below the 50-day SMA nonetheless, the technical outlook remains unchanged while below 1.1909, a close above this level changes the pair’s outlook to positive.
The GBP/USD has benefited from a weaker US Dollar and opened with an upward gap at 1.3219. The market remains optimistic about the EU-UK trade negotiations on the back of the resignation of the UK PM top advisor Dominic Cummings who is known for his support to Brexit without a deal. The pair could be on its way to retest 1.3300, a close above that level may keep the market upbeat towards 1.3460.
Gold and Oil
The oil price stabilized on Monday below 43.58 on hopes that OPEC+ could extend current production cuts to compensate for concerns of weaker demand due to surging Coronavirus in the US and the recent lockdowns in Europe and the UK. The Brent Crude eyes a test of $43.58 a close above this level could send the price even higher towards 44.80.
The Gold remained above $1,860 and edged higher towards $1,921. Nonetheless, a close below $1,860 could change Gold’s technical outlook from neutral to negative.
Looking Ahead
Not much today on the economic calendar, EUR/USD traders will tune in the ECB President Lagarde’s speech at 2:00 PM (GMT) then the ECB member Mersch’s speech at 2:30 PM. Later on, the market will follow Fed members' speeches Clarida at 6:00 PM, and Daly’s at 7:45 PM.