Market Overview

4 December 2020

A Reincarnated U.S. Aid Package Feeds an Anti-Dollar Trend and Euphoric Stock Sentiment

One more attempt is happening this week to undertake a bipartisan relief package for U.S. firms and population. The amount of $908 billion was an opening offer this time, which is more than two times less than all suggestions that already failed in the course of tough pre-election fighting. Now the important deal is within reach, both Democrats and Republicans signalled. The new version of the aid program was developed by Senator Mark Warner, a Democrat from Virginia, and Susan Collins, a Republican from Maine. Warner and Collins proposed to spend $288 billion to support small businesses, $180 billion on unemployment benefits and $160 billion to state and local governments.

In the previous plans, the biggest problem was seen to be adoption of much higher expenses given to the hands of state authorities. And now, considering that this sum is relatively small, it is clearly the last chance for politicians in Congress to coordinate at least some positive step for the economy before the year-end. Both parties hope to finish their job in the House and the Senate before the Christmas vacation, this task is supported by the presidential contender Joe Biden. From the market's point of view, what could this pile of freshly minted dollars mean? It could mean another reason for the global stock indexes to hold gains and soar, as well as for the weaker U.S. Dollar to reach the broadening money base, which would possibly be diluted by the Federal Reserve soon, just in time to fit with a new stimulus plan. The safe haven role of the Greenback may also be seen as a drug in a bullish market.

That's why the U.S. Dollar index is hitting a 31-month low against the basket of major reserve currencies, with EUR/USD above 1.2150 refreshing its maximum values since April 2018. A breakthrough of the $1.20 long-term ceiling for the single European currency is a great psychological sign for the whole sentiment on the currency market. The Chinese Yuan also quickly went below its previous 2 ½ year low, which it hit in mid-November, even despite some worries after the House of Representatives voted on a bill on Wednesday to force Chinese companies to delist from U.S. stock exchanges if they don’t comply to federal audit regulations. Other currencies, like the Australian and Canadian Dollars, happily joined the movement, as both of them went beyond their previous feats for the last two years, and the Swiss Franc has soared to its maximum values since 2015. Even the British Pound approached the 1.35 milestone area ignoring comments from EU and U.K. Brexit negotiating team members about the lack of guarantees that there will be any kind of deal at the end of the talks. 

All of the above means the U.S. Dollar weakening trend is in action, and many individuals in the market bet it will slide even more, as it was forecasted in the Wall Street Journal article previously cited.

It seems unlikely to expect that today's data on the U.S. labour market could turn the situation around. Even if the number of newly created jobs and hourly earnings for November are very good, which is questionable considering the current virus spikes. On the contrary, any job figures are more likely just to provoke a short-term volatility in currency pairs.

Meanwhile, California imposed stay-at-home orders again in areas where intensive care units are close to the limit, the New York Times wrote on Thursday. Governor Gavin Newsom announced his most aggressive steps since March to deal with the coronavirus. Residents would be required to stay at home, except for essential tasks and outdoor exercise, and most service businesses would have to shut down. Hotels in affected areas would be allowed to operate only “in support of critical infrastructure services.” As contrasted with the hardest stay-at-home orders the state imposed in March and April, Mr. Newsom said that this time parks and beaches would remain open, and he even encouraged residents to go outside and use them, and even to take outdoor fitness classes. The new orders will take effect when the intensive care units in a region’s hospitals fill to more than 85% of their capacity. None of the state’s five regions have reached that threshold yet, but some are expected to do so this week, state officials said. “This is the most challenging moment since the beginning of this pandemic,” Newsom said from his home, where he was still under quarantine after three of his children had contact with someone who later tested positive for the virus.

Such sentiments are now common in many U.S. States, and the epidemic situation there is clearly worse than in Europe. In the stock markets, hopes for vaccine rollouts are still prevailing vs today's reality. "Stock markets are behaving as if the world has already overcome the disease. In reality it will take time before vaccines will reach every corner of the world and infections start to decline," said Mitsubishi UFJ's Fujito. Even after the Wall Street Journal reported that Pfizer may half the vaccine rollout target due to supply chain obstacles, the Dow Jones Industrial Average index just cut some gains on Thursday evening, but quickly came back above the 30,000 round figure in Asia trading. The S&P500 broad market index fell just 0.06% on Thursday before market close in New York. Walt Disney posted a new all-time record above $154 per share, and even the "forgotten" shares of some companies in the travel industry have reared their heights, like Norwegian Cruise Line Holdings and Carnival Corporation, both of them rose in price more than 8% yesterday. United Airlines gained 6.81% on Thursday after the air carrier said it would be the first airline to receive a Boeing Co 737 MAX delivery following a 20-month grounding of the jet. The delivery is going to take place next week, and the company expects to receive eight new 737 MAX jets this month.

Meanwhile, Boeing soared to around $240 per share, updating its peak values from March 2020, as 737 Max aircrafts returns to service in Europe too, and the Dublin-based RyanAir said it ordered 75 Boeing 737 Max planes. Currently, Boeing has 210 firm orders for this plane, which are set for delivery between spring 2021 and December 2024. The 737 Max was grounded in March 2019 after the crash of an Ethiopian Airlines jet that occurred five months after another Indonesia’s Lion Air Max plunged into the Java Sea, and Boeing quotes were almost at $350 before these sad series of events.

Some oil companies including Exxon Mobil and Chevron may also gain soon as oil prices received a good lift to almost $50 per barrel in North Sea Brent benchmark, as a group of exporting countries known as OPEC+ agreed to slightly ease their deep oil output cuts by 500,000 barrels per day in the first quarter of 2021. The increase means OPEC+ would move to cutting production by 7.2 million bpd, or approximately 7% of global demand, compared with current cuts of 7.7 million bpd, so that the global oil supply would still be limited, and oil producers hope to gain from a better level of price.


Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.


Open Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
23 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2021 Teletrade-DJ International Consulting Ltd

Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.

The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies.

Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.