Equity markets slip from record highs, the US dollar falls versus all its peers, gold holds recent gains

Dec 30 • Market Commentaries • 257 Views • Comments Off on Equity markets slip from record highs, the US dollar falls versus all its peers, gold holds recent gains

After the Xmas break, several market indices printed record highs before retreating in the first full day of financial trading after the Xmas break. The UK FTSE 100 was closed other than for futures trading on Monday, and investors made up the lost ground on Tuesday pushing the index to a nine-month high shortly after London opened. The index closed out the sessions up 1.5% just above the 6,600-round number/handle at 6,602. The German DAX index also printed another intraday record high, before surrendering the gains to close -0.21% down.

EUR/USD close to recording 10% gains year-to-date

The euro chalked up gains versus several of its main peers during Tuesday’s sessions; oscillating close to R1 for most of the day at 6:45 pm UK time EUR/USD traded up 0.21%, up 2.57% monthly and 9.60% year-to-date.

EUR/GBP traded close to flat, and near the daily pivot point, just above the critical level/handle of 90.00, suggesting that any Brexit related relief-rally appears to have faded. The euro was up marginally versus JPY, while EUR/CHF was down -0.22% as the Swiss franc’s safe-haven status was in demand on Tuesday.

The US indices rallied quickly once the New York session was underway; however, the initial momentum failed to build. Before giving up the gains mid-session, the SPX 500, DJIA and NASDAQ 100 all printed intraday record highs. At 7 pm UK time the SPX 500 traded down -0.03%, the DJIA 30 down -0.28% while the NASDAQ 100 held a modest gain of 0.32%.

Equity market sentiment in the US was inconclusive due to doubts that the extra $2,000 per adult stimulus Trump and individual Senators had requested, would be approved and passed into law. Without the extra relief, the net gain per person of the Pandemic Relief Bill is only $300. Specific stocks will benefit from the trickle-down of a combined $2,000 to $2,500 direct-to-consumer stimulus, such as quoted retail stores.

The weekly unemployment claims number published on Thursday will be worth watching to establish if the USA’s temporary, seasonal jobs made a dent in the horrendous unemployment figure.

The prediction is an extra 833K weekly claims. Similarly, the first NFP data due Friday 8 will provide any evidence of widespread economic recovery, above and beyond the record stock market highs witnessed recently.

USD continues to fall versus its main peers

The dollar index (DXY) slipped to the critical 90.00 level/handle during Tuesday’s sessions, down -0.34% on the day the index is down -6.60% year-to-date. USD/CHF breached S2 to trade down -0.43% on the day and -2.62% monthly. After recovering last week from lows not seen since 2014, the major-currency pair has experienced a significant sell-off during this week’s sessions.

GBP/USD registered modest gains during the day. Oscillating close to the daily pivot point throughout the trading sessions, the currency pair often referred to as “cable” traded up 0.25% during the New York session. Up 0.80% weekly and 2.64% YTD, sterling has failed to generate the Brexit dividend many analysts predicted after the UK and EU’s final agreement.  

Gold trades in a holding pattern

XAU/USD has continued to trade in a wide channel since markets opened this week. The precious metal traded up 0.33% on the day at $1,877 per ounce, still short of the multi-year highs of approximately $2,040, printed during the first week of August.

Economic calendar events to monitor on Wednesday, December 30

The last week of the year is traditionally a quiet time for fundamental economic news, and on Wednesday the focus is on US data primarily. According to the Reuters forecast, pending home sales have risen by 17.5% YoY and by 0.3% MoM in November. The advanced goods sales in the US were down -$83 billion, according to Reuters. Analysts and traders will also look for the latest crude oil stocks to establish if the US economy is consuming energy or storing it, indicating any momentum behind the supposed recovery.

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