The Georgia Senate run-off appears to confirm that the Democrats have won both seats and will control the Senate. The ‘Blue Wave’ many hoped for and many feared. President Trump still refuses to concede defeat in the Presidential election with the Biden/Harris inauguration set for January 20.
Unemployment remains the significant global issue. US weekly claims had a better end to 2020 beating estimates, but they remain elevated with expectations this week of 833,000 new claims. This week’s Nonfarm Payroll headline is also expected to slip under 100,000 with unemployment moving up to 6.8%.
The vaccine roll outs are gaining traction globally, news that has helped to lift sentiment as the pandemic and lockdowns continue to grow as the new variant proves very contagious. There have now been more than 77.0m confirmed cases and over 1.70m people are known to have died.
The $2.3 trillion US government stimulus for the economy is under way and the $600 cheques being delivered to individuals. The prospect of more to come if the Democrats push through more spending is pressuring the USD.
The USDIndex traded to new 33-month lows this week at 89.20. EURUSD rallied again to breach 1.2300 and top at 1.2345, USDJPY moved significantly lower, under 103.00 to 102.60 lows and Cable rallied to break 1.3600 and even test 1.3700.
Global stock markets rallied into year-end, posted new intra-day all-time highs on the first day of 2021 before stalling as the news from Georgia rippled out. The USA500 peaked at 3782. Positive vaccine news and expectations of more fiscal stimulus from the US support investor sentiment.
The UK-EU trade deal became law this week, with both sides declaring it a “good” deal. Only time will tell how the new relationship unfolds. PMI data from both sides of the English Channel has been better than expected but key Services data yet to come this week.
The Gold price recovered significantly this week rallying over $1900 and testing $1950 as talk of inflation raised its head once more. However, its Bitcoin that remains the asset on “Bid” as it broke over $35,000 for the first time, March 2020 it traded down to $3,760. However, volatility continues to follow the crypto market space.
USOil prices continue to rally and the conclusion of the latest OPEC+ meeting this week saw prices spike to $50.00 as the Saudis offered a surprise output cut for February and March and Russia agreed to a reduced production increase. Prices are supported by the increased positive sentiment, but pandemic pressures limit the upside.
The yield on the US 10-Year Treasury Note broke the key psychological 1.00 level following the Georgia news. The anticipation of a larger US stimulus package, record high stock markets and the weaker US Dollar keep yields bid and Treasury demand weaker.
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Stuart Cowell
Head Market Analyst
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