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Morning Brief 31st December 2020
Asian round-up
UK Parliament matched financial market participants expectations and passed the new Brexit deal into law on Wednesday evening, sending sterling to a thirty-one-month trading high. Still, the market is somewhat cautious as UK Prime Minister warned of a potential third lockdown in the UK as COVID-19 continues to spread.
In the United States, Colorado has announced that they are the first state to find the new COVID-19 variant in America. S&P 500 futures are taking the news well so far, however, if this becomes a trend then the market mood could soon change.
More bearish news coming from the United States for the market to digest this morning. The Trump administration has announced that they are going level extra tariffs on certain products from Germany and France.
Data earlier today showed that China’s manufacturing sector expanded for its tenth consecutive month, as the official gauge of factory activity for December came in at 51.9. The reading was slightly lower than November 52.1 reading.
China’s non-manufacturing reading was, however, a bright spot for markets, and came in at 55.7 for the month of December. Non-manufacturing covers important sectors such as retail, construction, real estate, software, and aviation.
FX
The British pound has traded to a new thirty-one month high against the US dollar this morning, after UK lawmakers passed the new Brexit deal into law. The GBPUSD pair has limited technical resistance on the chart until the 1.3770 area if price breaks past the 1.3650 level.
The Australian dollar is once again the biggest winner of the day so far and is trading higher by around (+0.25%) on the day. The Australian dollar cracked the $0.7700 level against the US dollar, no doubt due to the positive manufacturing data from the United States.
The EURUSD pair is still flirting with the 1.2300 handle, although bullish momentum is still lacking at this stage. US data today may play a hand in pushing the pair above 1.2300 later today. Technical analysis highlights the 1.2330 and 1.2400 areas as the next key upside levels.
Indices
The Shanghai Composite received a boost (+1.5%) due to the solid manufacturing data from the Chinese economy, while the Nikkei 225 closed down (-0.5%) lower on the day, as 1,000 new COVID-19 infections have been reported in Tokyo.
The German DAX has pulled back into negative territory on the week, after breaking to an all-time high earlier this week. GER30 and CAC40 traders will digest the US tariff news during the European session and solid Chinese manufacturing data.
The FTSE100 has shrugged-off the bullish news surrounding UK Parliament passing the new Brexit deal into law so far. The FTSE100 may revert back to its inverse correlation with sterling on the last day of 2020 as the pound is very strong today. Investors also appear more cautious today due to the threat of a third lockdown in the United Kingdom.
Commodities
Copper did not take the Chinese manufacturing data well and is trading in negative territory for the day. Copper has had a stellar year, and with a lack of positive news investors may be booking profits into year-end.
Silver and gold remain range-bound at the moment and are not rallying despite the US dollar index sinking to multi-year lows. Silver looks the more bullish of the two metals right now and may need to break from the $26.00 to $26.60 range before it makes a decisive move.
Upcoming News
The economic docket today is light due to New Year’s Eve and once again focused on the United States economy today, with weekly and initial jobless claims from the American economy the main events data wise.
