US markets rise after Pandemic Bill becomes law; Euro markets rise after Brexit deal approved

Dec 29 • Market Commentaries • 1651 Views • Comments Off on US markets rise after Pandemic Bill becomes law; Euro markets rise after Brexit deal approved

The German DAX 30 index printed a record high during Monday’s trading sessions due to the Brexit deal getting ratified by the EU council members. The index closed 1.46% up at 1,375 and is up 2.96% year-to-date.

In contrast, the UK FTSE 100 is down -14.50% year-to-date, despite enjoying a small relief rally during Monday’s session closing the day out up 0.10%. MPs are examining the Brexit deal’s sufficient detail with a view to it passing through the UK parliament this week.

However, analysts and market commentators have had time to view it and confirm that the result is a hard Brexit. The UK’s only concession is free trade in terms of no tariffs or quotas, but frictionless trade and free movement have ended. More worrying is that the deal only covers the free exchange of goods, whereas services (80% of the UK economy) is not part of any trade deal.

Sterling experienced mixed fortunes versus its main peers during the day’s sessions, GBP/USD traded down -0.57%, while EUR/GBP traded at 90.72 up 0.81% retaking the 90.00 level handle and up 1.05% month on month. GBP/CHF was down -0.72% and GBP/JPY traded down -0.40%. Traders might reasonably conclude that any GBP Brexit rally is now over.

US equity indices experienced a significant rally during the New York session. The $910 billion Pandemic Relief Bill getting signed by Trump provided a boost. A proportion of low-income households will receive up to $600 per adult next month; however, due to the delay, some unemployment benefits have expired so the net gain will be closer to $300 per person, roughly the weekly cost of a grocery bill per household.

The US government apparatus also approved $1.4 trillion in funding to prevent the government from shutting down. The dislocation between the SPX 500 equity market climbing to reach a record high, while the government needs more than $1 trillion to continue operating, and 20 million adults are unemployed is increasingly challenging to process.

EUR/USD rose by 0.17% on the day by 7 pm UK time, up 1.97% monthly and 9.50% YTD. USD/CHF traded down -0.17%, USD/JPY traded up 0.16%, down -4.40% YTD. The dollar index (DXY) traded close to flat maintaining position above the critical psyche handle of 90.00 at 90.35 but down -6.28% year-to-date.

Gold traded close to flat on the day at $1875 per ounce, and the precious metal has enjoyed considerable gains this year up 22.70%. Silver’s year-to-date rise has been spectacular, up 45.80% and 1.74% up on the day to trade at $26.30 per ounce.

WTI oil traded down -1.12% on the day, at $47.77 per barrel. The current price of a barrel of oil illustrates the pandemic’s effect on commerce; year-to-date the price is down -22%.

Economic calendar events to monitor on Tuesday, December 29 US data features prominently during Tuesday’s trading sessions. According to the Reuters forecast, the latest Case-Shiller home prices could rise by 7.3% yearly up to October, up 0.8% monthly. Overall business confidence is forecast to come in at 80, down from 85 previously.

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