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Intermarket:
- SP Futures 3711 (+0.24%)
- EUSTXX 3543 (+0.48%)
- Crude Oil 45.50 (-0.22%)
- US 10YR 0.91 (-0.15%)
- EurUsd 1.2131 (+0.25%)
- UsdJpy 104.15 (+0.01%)
- DAX 13334 (+0.37%)
FX markets trod water yesterday, awaiting developments in EU/UK trade talks, while the first day of the vaccine rollout in the UK also drew a lot of attention. The news helped push the SP500 above 3,700 to a new record high, along with the Nasdaq; hopes of a new $916bn economic aid package from US lawmakers also supported the risk rally.
There were positive developments yesterday on the Brexit front, despite EU Barnier’s negative tone: in a concession from Britain, EU will have officials stationed in Northern Ireland from Jan 1 as the UK dropped the clauses that conflict with the Withdrawal Agreement. Irish Foreign Min Coveny said the Irish border issue has been settled, deal was historic. But we shall see what today’s Johnson/von Der Leyen dinner meeting will produce. This is the main focus today.
Beyond Brexit headlines and vaccine-fuelled optimism, today we get the Bank of Canada rates decision and consensus is for no change. Despite the return of lockdowns, data has been encouraging. Also, Canada will receive the first vaccine shipments next week, which is also a positive. All in all, there is not much to justify a move from the BOC.
Matters that Matter:
• Trump administration makes new $916 billion offer for COVID-19 aid
• Talk of a ‘no deal’ Brexit grows as deadline looms
• Softbank said to discuss going private - Bloomberg
• Australia consumer sentiment hits 10-year high, Dec +4.1%, +2.5% prev
• Pelosi: President’s Unemployment Insurance proposal is unacceptable; proposal must not obstruct bipartisan talks underway; Mnuchin’s $916bn aid plan unacceptable
• Canadian Province of Alberta orders closure of gyms, dine-in restaurants, bars and bans social gatherings; restrictions to begin Dec 13, to last 4 weeks; Alberta risks running out of hospital capacity
• US House passes bipartisan defence bill despite threat from Trump to veto; some House Republicans said they won’t vote to override potential Trump veto
• Mnuchin: Spoke with Pelosi and presented $916bn coronavirus relief package; admin proposal includes money for state and local governments and liability protections for businesses; proposal would tap $140bn in unused pay check protection program funds, $429bn in treasury funds
Majors 1-Day View:
USDJPY
- Prices posted the 3rd inside day in a row on Tuesday, highlighting investor indecision. However, with such an evident range contraction, breakouts are the better play. The call is thus to play the break of 104.30/103.90
- Risk on mood supporting prices.
- Offers reported above 104.30, bids below 104.00
EURUSD
• Prices traded sideways on Tuesday within Monday’s range, posting a little changed close. As such, trend signals are weak but with buyers returning to the market in Asia trade, signals are marginally bullish.
• Markets rather dormant on Tuesday awaiting fresh news, but risk appetite improved into Wednesday.
AUDUSD
• Prices traded sideways on Tuesday within Monday’s range, posting a little changed close. As such, trend signals are weak but with buyers returning to the market in Asia trade, signals are marginally bullish.
• Strong data releases continue, after Covid-19 restrictions eased.
• Economic recovery in 2021 should be positive for AUD.
GBPUSD
• Prices traded sideways on Tuesday within Monday’s range, posting a little changed close. As such, trend signals are weak but with buyers returning to the market in Asia trade, signals are marginally bullish.
• GBP flows dependant on Brexit headlines.
• Johnson-von der Leyen dinner key today.
FX Relative ATR Grid
Comment: Ranges contracted swiftly yesterday, in an unsustainable fashion. Expect range expansions today.
FX Relative Strength Grid
Comment: Signals are weak going into Wednesday, but the more evident movement was JPY weakness vs. CHF strength.