Gold Pulls Back From Highs

Time is running out for passage of additional US fiscal stimulus in 2020 as the year winds down and the holidays rapidly approach. Congressional parties hit a brick wall yet again, even with the scaled-down $900 billion plan, this time on conflict over employer virus liability. Each time the negotiations appear to be about to settle, another hurdle seems to emerge.

At the same time, coronavirus cases across the US continue building while hospital-bed availability shrinks. As well, this coming week, the US COVID death rate will likely hit 300,000, with millions already testing positive for the virus.

Here are the key market moving factors for the week:

 The US

• The Fed could deliver fresh measures following softer economic data and no fiscal aid from Congress. Expectations are growing for the Fed to extend the average maturity of their Treasury purchases. The risk of Congress going home for the holidays without delivering a rescue bill is growing by the day.
• On the data front, the flash PMI readings could show modest weakness in both the manufacturing and service sectors. Both retail sales and industrial production in November are expected to decline, while housing data appears poised to steady.

 EUROPE

• It’s been a very good week for the EU. The ECB announced provided fresh stimulus for the bloc as lockdowns wreak havoc on the economy once more. The 27 members signed off on the EU budget and recovery fund after Hungary and Poland dropped their opposition to it.
• It would have been a perfect week but for the fact that Brexit negotiations haven’t really progressed, despite face to face talks between Boris Johnson and Ursula von der Leyen.

The UK

• The economy grew at its slowest monthly pace since May in October and November is expected to be far worse as a result of the lockdown. Growth of 0.4% left the economy 7.9% smaller than it was before the pandemic and that’s before the lockdown kicked in.
• The Bank of England last month increased its bond buying program in an attempt to support the economy through the second wave but should no-deal Brexit become a reality, more will have to be done on the fiscal and monetary side.
• Neither side is willing to call it quits on talks but there’s no doubting that no-deal Brexit odds have significantly increased this week and traders are starting to feel the heat. Volatility in the pound has been on the rise and it has fallen more than 2% against the dollar this week.
• Leaders have pledged to make a firm decision on the negotiations by Sunday but since when do deadlines matter when it comes to Brexit? There’s only one deadline that’s set in stone (ish) and that’s Dec. 31. Still, this claim means this weekend carries heightened market risk.

JAPAN

• A heavy data week beckons for Japan with the Tanken survey on Monday expected to remain negative, but improve over October’s number. Balance of Trade and PMI’s follow on Wednesday, with increasing COVID-19 restrictions and concerns set to see imports fall markedly, and forward sentiment sour.
• That may weigh on Japan equities mid-week ahead of the FOMC decision in the U.S.
• The Bank of Japan meets on Friday with rates to remain unchanged, but the Bank expected to announce an increase in asset buying and lending facilities.
• That would dovetail in with last week’s supplementary budget and assuming no surprises from the Federal Reserve, see Japan equities rally into the end of the week.

AUSTRALIA

• PMIs on Wednesday should show confidence continuing to increase. Key data is Employment on Thursday after October’s blow-out 179,000 job increase. November will be lower but a still respectable 50,000 jobs. Risks are skewed to another upside surprise, boosting the AUD and local equities.
• As long as the global recovery trade retains momentum in international markets, and iron ore and copper prices elevated, Australian equities and the currency will remain investor favourites.

CHINA

• China stocks finished the week under pressure as the PBOC leaves liquidity tight and it is swept by a wave of corporate defaults. New sanctions on China officials and telcos by the U.S. continues to muddy the waters, with China detaining a Bloomberg reporter in Beijing this week.
• China’s Industrial Production and Retail Sales on Wednesday are expected to be unchanged from October’s numbers. That may escalate concerns that China’s 2020 recovery story is running out of steam, further dampening equities, although the Yuan should remain strong on liquidity and interest rate carry.

Market Overview:

 Gold

• Gold (XAU/USD) settled last week with modest losses below $1940, as the bears dominated amid fading hopes for a US coronavirus relief aid.
• Further, investors remained optimistic about the US Food and Drug Administration’s (FDA) authorization to Pfizer’s covid vaccine.
  
  Oil

• OPEC+ agreed on output targets for next year
• Oil prices rose on Monday, pushing Brent back above $50 a barrel, buoyed by hopes that a rollout of coronavirus vaccines will lift global fuel demand while a tanker explosion in Saudi Arabia jangled nerves in the market.
• Brent crude futures for February rose 38 cents, or 0.8%, to $50.35 a barrel by 0454 GMT, while U.S. West Texas Intermediate crude futures for January were up 32 cents, or 0.7%, at $46.89 a barrel.
• The OPEC+ joint ministerial monitoring committee (JMMC) that monitors compliance among members will meet on Dec. 16, while OPEC+ will meet on Jan. 4 to study the market after their last decision to limit production rises to 500,000 barrels per day starting next year.

Below are the major market moving events for the week:

 All times listed are EDT

Monday

21:00: China – Industrial Production: seen to edge up to 7.0% from 6.9%.

Tuesday

2:00: UK – Claimant Count Change: anticipated to soar to 50.0K from -29.8K.

Wednesday

2:00: UK – CPI: probably edged down to 0.6% from 0.7%.

3:30: Germany – Manufacturing PMI: forecast to slip to 56.5 from 57.8.

4:30: UK – Manufacturing and Services PMI: seen to edge higher, to 55.9 and 50.5 respectively.

8:30: US – Core Retail Sales: to fall 0.1% from 0.2%.

10:30: US – Crude Oil Inventories: to plummet to 1.424M from 15.189M.

14:00: US – Fed Interest Rate Decision: predicted to remain steady at 0.25%.

19:30: Australia – Employment Change: forecast to plunge to 50.0K from 178.8K

Thursday

3:30: Switzerland – SNB Interest Rate Decision: anticipated to stay at -0.75%.

5:00: Eurozone – CPI: to remain flat at -0.3%.

7:00: UK – BoE Interest Rate Decision: expected to hold at 0.10%.

8:30: US – Building Permits: to edge higher to 1.550M from 1.544M.

8:30: US – Initial Jobless Claims: seen to ease to 800K from 853K.

8:30: US – Philadelphia Fed Manufacturing Index: to drop to 19.0 from 26.3.

Tentative: Japan – BoJ Interest Rate Decision: expected to hold at -0.10%.

Friday

2:00: UK – Retail Sales: anticipated to plunge to -4.2% from 1.2%.

4:00: Germany – Ifo Business Climate Index: seen to edge to 90.5 from 90.7

5:30: Russia – Interest Rate Decision: predicted to keep rates steady at 4.25%.

8:30: Canada – Core Retail Sales: seen to rise to 0.3% from 0.1%.

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.

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