CFD Markets News and Forecasts — 31-12-2020

On Monday, at 00:30 GMT, Japan will publish the manufacturing PMI for December. At 01:45 GMT China will introduce PMI index for the manufacturing sector from Caixin for December. Then the focus will be on Markit's manufacturing PMI for December: Switzerland will report at 08:30 GMT, France at 08:50 GMT, Germany at 08:55 GMT, the eurozone at 09:00 GMT, and Britain at 09:30 GMT. Also at 09:30 GMT Britain will announce a change in lending M4 money supply, the number of approved applications for mortgage loan and net lending to individuals for November. At 09:30 GMT, the eurozone will publish the Sentix investor confidence indicator for January. At 14:45 GMT, the US will present the index of business activity in the manufacturing sector for December. At 15:00 GMT, the US will report a change in the volume of spending in the construction sector for November. Also on Monday, the OPEC-JMMC meeting will take place.

On Tuesday, at 07:00 GMT, Germany will announce a change in retail trade volume for November. At 07:30 GMT, Switzerland will present the consumer price index for December. At 08:55 GMT, Germany will report changes in the unemployment rate and the number of unemployed for December. At 09:00 GMT, the eurozone will announce a change in the M3 aggregate and private sector lending for November. At 13:30 GMT, Canada will release the producer price index for November. At 15:00 GMT, the US will publish the ISM manufacturing index for December.

On Wednesday, at 00:30 GMT, Japan will present the index of business activity in the service sector for December. At 01:45 GMT China will release the index of business activity in the services sector Caixin for December. At 05:00 GMT, Japan will publish a consumer confidence indicator for December. Then the focus will be on business activity indices in the services sector for December: at 08:50 GMT, France will report, at 08:55 GMT - Germany, at 09: 00 GMT-the eurozone, and at 09:30 GMT - Britain. At 10:00 GMT, the eurozone will release the producer price index for November. At 13:00 GMT, Germany will publish the consumer price index for December. At 13:15 GMT, the US will announce a change in the number of employees from ADP for December. At 14:45 GMT, the US will present the PMI for the services sector for December. At 15:00 GMT, the US will report a change in the volume of production orders for November. At 15:30 GMT, the US will announce changes in oil reserves according to the Ministry of Energy. At 23:30 GMT, Japan will announce a change in the level of wages for November.

On Thursday, at 00:30 GMT, Australia will report changes in the volume of construction permits and the trade balance for November. Also at 00:30 GMT Australia will release the index of number of vacancies from ANZ for December. At 03:00 GMT, China will announce a change in the trade balance for December. At 06:45 GMT, Switzerland will announce a change in the unemployment rate for December. At 07:00 GMT, Germany will announce a change in the volume of orders in the industry for November. At 07:30 GMT, Switzerland will report a change in retail trade volume for November, and at 08:00 GMT - a change in the volume of SNB reserves in foreign currency for December. At 09:00 GMT, the eurozone will release the ECB's economic bulletin. At 09:30 GMT, Britain will publish the PMI for the construction sector for December, and at 09: 30 GMT it will report changes in the volume of mortgage loans for the 3rd quarter. At 10:00 GMT, the eurozone will release the consumer price index for December and announce changes in retail trade volume for November. Also at 10:00 GMT, the eurozone will present an index of business optimism in industry, an index of sentiment in the economy and an index of consumer confidence for December. At 12:30 GMT in the eurozone, the ECB's report on the monetary policy meeting will be released. At 13:30 GMT, the United States and Canada will announce a change in the foreign trade balance for November. Also at 13: 30 GMT, the United States will announce a change in the number of initial applications for unemployment benefits. At 15:00 GMT, Canada will publish the Ivey Managers ' Index for December. Also at 15: 00 GMT, the US will release the ISM index for the non-manufacturing sector for December. At 21:30 GMT Australia will present the index of activity in the construction sector from AiG for December. At 23:30 GMT, Japan will announce a change in the volume of household spending for November.

On Friday, at 05:00 GMT, Japan will release an index of leading economic indicators for November, and at 06: 00 GMT will report a change in the volume of orders for equipment for December. At 07:00 GMT, Germany will announce changes in the volume of industrial production and the balance of foreign trade for November. At 07:45 GMT, France will announce changes in the volume of consumer spending, industrial production and foreign trade balance for November. At 08:30 GMT, Britain will release the Halifax house price index for December. At 10:00 GMT, the eurozone will report a change in the unemployment rate for November. At 13: 30 GMT, the US will announce changes in the unemployment rate and the number of people employed in the non-agricultural sector for December. Also at 13:30 GMT, Canada will announce changes in the unemployment rate and the number of people employed for December. At 15:00 GMT, the United States will report changes in inventories in wholesale warehouses for November. At 18:00 GMT, in the US, the Baker Hughes report on the number of active oil drilling rigs will be presented. At 20:00 GMT, the US will announce a change in the volume of consumer lending for November.

Информационно-аналитический отдел TeleTrade 

Office of the United States Trade Representative (USTR) announced on Wednesday it would raise tariffs on certain products imported from the European Union (EU), including "aircraft manufacturing parts from France and Germany, certain non-sparkling wine from France and Germany, and certain cognac and other grape brandies from France and Germany".

In its statement, USTR said it was amending some of its tariffs because the EU had unfairly calculated tariffs against the U.S. allowed by a September World Trade Organization's (WTO) ruling in Large Civil Aircraft litigation. "As a result, to keep the two actions proportionate to each other, the U.S. is forced to change its reference period to the same period used by the European Union", the USTR added.  "However, in order to not escalate the situation, the United States is adjusting the product coverage by less than the full amount that would be justified utilizing the EU’s chosen time period. "

In a notice in the Federal Register, the USTR specified that "the annual trade value of the tariff subheadings subject to additional duties under the revised action remains at approximately $7.5 billion, which is consistent with the WTO Arbitrator’s finding on the appropriate level of countermeasures in the United States’ dispute against the EU involving large civil aircraft".

• If price outlook requires it, there must be a turning point in terms of interest rates in Eurozone 
• Price pressures in Eurozone are expected to remain subdued in coming years 
• A shift in interest rate policy can take some time
• Governments should prepare for interest hikes and not pretend that their debt burden is easy to service
• ECB will not take into consideration public debt servicing costs if price stability mandates higher interest rates
• Economic outlook ultimately depends on how coronavirus infections develop after lockdown
• We expect Germany's debt burden during the pandemic to be smaller than during the 2008 financial crisis
• Second coronavirus wave is not expected to inflict more economic damage than first wave
• German government's emergency fiscal measures must be terminated once crisis unleashed by the pandemic is over
• 2021 general election in Germany should play no role in decision to end or extend economic rescue measures

FXStreet reports that analysts at Natixis note that two hypotheses have emerged: the world is heading for deflation, or it is heading for hyperinflation. So far, it has been low inflation, but not deflation, as real interest rates have remained very low. Financial markets expect a continuation of this equilibrium with low inflation but not deflation, as deflation is being averted by the money creation and the structural inflationary factors despite the massive savings glut.

“The deflation hypothesis results from the observation of an (ex-ante) global savings glut (ex-post, savings are equal to investment at the global level) and therefore abnormally weak demand. The savings glut is evidenced by the rise in the global savings rate and in the private sector savings rate, the decline in nominal and real long-term interest rates and the decline in global inflation.”

“It is true that if the savings glut gets worse after the COVID-19 crisis, depressed demand could give rise to true deflation. True deflation is a situation where inflation becomes so low that the real interest rate becomes excessive. This is not yet the case.”

“Traditional monetary theory explains that a large increase in the money supply leads to a large increase in prices in the medium term. But for this link between the money supply and inflation to appear today, the excess savings accumulated during the covid crisis must be at least partially consumed. If they are not consumed and are invested in financial or real estate markets, then asset prices but not goods and services prices will rise.”

FXStreet reports that on November 15, the Regional Comprehensive Economic Partnership (RCEP) was signed, an Asian-Pacific free-trade agreement that will probably become effective sometime in mid-2021. The agreement has been signed by 15 countries: all 10 ASEAN countries, Australia, China, Japan, South Korea and New Zealand. Covering roughly 30% of global population and GDP, it is easily the largest FTA in the world. However, economists at Rabobank argue that India’s choice not to sign the RCEP is actually quite rational. 

“RCEP is a trade bloc of net exporters focused more externally than internally. China is focusing increasingly on its domestic market and is not going to fulfill the buyer of last resort. India is an obvious candidate to take up this role, as RCEP members were responsible for almost 70% of India’s trade deficit over the last five years. India’s weakening external position, however, affects its financial conditions and creditworthiness.”

“If India were to join the RCEP, this could hamper its transition towards industrialization in the face of a surge in imports, which would leave its economy dominated by agriculture and services. Data indeed shows that the deeper the trade relation between India and China grew, the more we have seen a shift towards imports of high-skill and technology-intensive manufactures from China, while India’s exports consist of a stable chunk of commodities.”

Reuters reports that French European Affairs junior minister Clement Beaune said that the EU didn't punish the UK with the Brexit trade deal and managed to defend its interests.

Beaune told that Britain had punished itself by voting to leave the bloc.

The UK officially leaves the European Union's orbit on Thursday night, after a tempestuous 48-year liaison with the European project.

Bloomberg reports that gold is poised to cap the biggest annual advance in a decade after a tumultuous year, with gains this month aided by the dollar’s decline to the lowest level since April 2018.

Bullion hit a record in August as investors sought haven assets amid the pandemic. The surge was buttressed by unprecedented waves of stimulus, including from the Federal Reserve, which fanned concerns of currency debasement. Holdings in bullion-backed exchange-traded funds set an all-time high in October, although they’ve since ebbed with the roll-out of vaccines.

“Gold’s main drivers -- weaker U.S. dollar and low real interest rates -- are likely to provide support” even as vaccines are distributed around the world, said Vasu Menon, executive director, investment strategy, at Singapore-based Oversea-Chinese Banking Corp. With the lower-for-longer Fed, “it is too early to throw in the towel on gold,” he said in an email.

Bullion up 6.55% this month, and 24.75% higher over 2020, poised for the biggest full-year advance since 2010.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2429 (3198)

$1.2395 (814)

$1.2366 (2841)

Price at time of writing this review: $1.2301

Support levels (open interest**, contracts):

$1.2214 (3778)

$1.2179 (1672)

$1.2138 (2190)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date January, 8 is 78432 contracts (according to data from December, 30) with the maximum number of contracts with strike price $1,2100 (4873);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3715 (1679)

$1.3689 (1006)

$1.3670 (1619)

Price at time of writing this review: $1.3643

Support levels (open interest**, contracts):

$1.3498 (537)

$1.3462 (820)

$1.3422 (826)

Comments:

- Overall open interest on the CALL options with the expiration date January, 8 is 58711 contracts, with the maximum number of contracts with strike price $1,4000 (33150);

- Overall open interest on the PUT options with the expiration date January, 8 is 30107 contracts, with the maximum number of contracts with strike price $1,2800 (2935);

- The ratio of PUT/CALL was 0.51 versus 0.51 from the previous trading day according to data from December, 30

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

Reuters reports that traders said that China's major state-owned banks were seen buying U.S. dollars at the rate of about 6.52 yuan on Thursday, in a move viewed as an effort to keep the local currency from rising too fast and breaching a key level.

The onshore spot market opened at 6.5204 per dollar and surged to a high of 6.5148 at one point in morning trade, its loftiest since June 22, 2018.

The state bank action quickly dragged the yuan to the weaker side of 6.52 per dollar, four traders told Reuters.

For the year, the yuan has appreciated nearly 7% and is set to book its first annual gain in three.

Another trader said big banks started purchasing the greenback whenever the spot price rose past 6.52, adding the move could be an attempt by authorities to control the pace of yuan appreciation through state banks.

Traders added that 6.52 is widely seen as the ceiling for the yuan for now. A breach of that level could push the yuan over the key rate of 6.5, considered by markets as a new red line for authorities.

RTTNews reports that survey data from the National Bureau of Statistics showed that China's manufacturing sector growth moderated at the end of the year.

The official manufacturing PMI fell to 51.9 from 52.1 in November. The score was forecast to drop marginally to 52.0. The 50-point mark separates growth from contraction on a monthly basis.

The export order sub-index in manufacturing eased to 51.3 from 51.5 in November.

The non-manufacturing PMI that measures sentiment in the services and construction sectors declined to 55.7 in December from 56.4 a month ago.

Zhao Qinghe, an official at the NBS, said in a statement accompanying the data release that small businesses were pressured by higher labour, raw material and distribution costs. "Small manufacturers also suffer from the problem of hiring labour as the service sector in China is competing for workers," said Pang.