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Intermarket:
- SP Futures 3654 (-0.18%)
- EUSTXX 3513 (-0.28%)
- Crude Oil 46.75 (-0.05%)
- US 10YR 0.91 (-0.33%)
- EurUsd 1.2158 (+0.20%)
- UsdJpy 104.05 (-0.17%)
- DAX 13270 (-0.25%)
Risk appetite is less buoyant into Friday as US stimulus talks hit yet another stalemate, with both House Speaker Pelosi and TSC Mnuchin unable to find a compromise on the business liability shield that Republicans are insistent on. At the same time, US Jobless Claims rose unexpectedly, showing signs of strain as the Covid-19 pandemic continues to weigh on the economy. The Pfizer FDA approval did little to calm the markets, as it was already expected.
At the same time, the prospects of a hard Brexit are increasing as PM Johnson said the UK should be prepared to leave the bloc without a deal. The Pound has started to price in this scenario, falling decisively yesterday across the board.
The EU budget agreement of EUR 1.8tn saw its official passage, easing any remaining anxieties and supporting prices after the ECB basically delivered what the market was expecting.
Focus today will remain on Brexit headlines and on the second day of the EU Council summit.
Matters that Matter:
• UK’s Johnson says ‘strong possibility’ of no-deal split in EU trading ties
• USD further pressured by rise in Jobless Claims data and record Covid-19 cases.
• US FDA advisers overwhelmingly back authorizing Pfizer COVID-19 vaccine
• States assail ‘bogus’ Texas bid to overturn U.S. election at Supreme Court
• NZ central bank says monetary policy not best way to cool housing market
• NZ Nov Mfg PMI, 55.3, 51.7 prev
Majors 1-Day View:
USDJPY
- Despite initial gains of over ¼ Big Fig, sellers returned to the market on Thursday, prices posting a gravestone doji, signalling short-term weakness. Also, the trend of higher daily lows was breached overnight. As such, the call for Friday is bearish.
- Weakness in risk mood and yields weigh on prices.
- Offers from 104.50, bids from 103.90 and below.
EURUSD
• After 4 consecutive little changed closes, prices posted a strong bullish close on Thursday, with signals improving. As such, the call is cautiously bullish for Friday.
• No surprises from Lagarde, so no reason to sell the Euro.
• Prices remain bid on USD weakness and GBP weakness.
AUDUSD
• Despite prices being overbought at multiple levels, gains of over 1 Big Fig on Thursday have posted fresh 2 ½ year highs and in the absence of a sell signal, the outlook for Friday remains cautiously bullish.
• Strong data releases continue, after Covid-19 restrictions eased, supporting AUD.
• Prices supported on USD weakness after ECB meeting, copper & oil hit new trend highs
GBPUSD
• With losses of over 1 ½ Big Fig on Thursday, signals have switched to bearish for Friday.
• No breakthrough in Brexit – deadline pushed to Sunday.
• Market now pricing in negative BOE rates by May
FX Relative ATR Grid
Comment: Ranges expanded across the board Thursday, keeping trading conditions lively into Friday.
FX Relative Strength Grid
Comment: The strongest signals going into Friday are GBP and USD weakness vs. NZD and CHF strength.