During the overnight session, the US senate passed the COVID-19 relief and government funding package as expected. The attention now turns to comments from US house speaker Pelosi, that more needs to be done with regards to stimulus.
This is setting up 2021 and the new Biden administration for more flows from the government to the American people and could give a further rise to equities that have been pumped higher on the back of the current stimulus. Biden welcomed the COVID-19 relief package and also stated “our work is far from over. Starting in the new year, Congress will need to immediately get to work on support for our COVID-19 plan.” Also, last night within the voting was a spending bill to keep the government open through September 2021 avoiding a shutdown over the holiday period and beyond.
The US dollar index has started the day firm and could trade into most of yesterday’s range as it confirms or breaks through the 91.00 resistance level.
Newswires announced that UK PM Johnson and French President Macron had agreed to restart freight movement across the English Channel. They will announce their plans ahead of Wednesday with regards to lifting the travel ban and trade. Since the UK announced they had identified the new variant of coronavirus 40 + countries have now banned UK arrivals.
Cable is continuing to trade within a rising channel having rejected the 1.3200 level yesterday and any failure to close above the 1.3600 would suggest that this channel will eventually break to the downside. On the Daily time frame the 200 sma is flat and around the 1.28000 level and would be a great target for anyone shorting the GBPUSD, though with the current bearish trend in the US dollar the move lower for Cable would probably be short lived.
Late in the trading yesterday we had news that UK PM Johnson was making a last ditched attempt for a Brexit deal with a concession on one of the larger stumbling blocks, fisheries. It is to be seen whether the French government find this proposal acceptable and whether the rest of the Eurozone would agree.
The EURUSD will start the European open under the 1.2300 big figure. 1.2272 is the resistance level marked by last Thursdays high print, having seen the price action yesterday take out that days low and then reject that lower level, any bad news out of the US this afternoon could be the catalyst needed to get through this resistance in EURUSD and push towards the 1.2400 – 1.2500 supply zone.
Looking ahead on the economic calendar, today we have UK GDP data and Public Sector Net Borrowing. The expectations are for the GDP figures to remain at previous levels and for Borrowing to have risen.
In the US session we have US Core PCE which is expected to remain unchanged, US GDP data, Existing Homes sales and consumer confidence readings.
Revisions to trade data suggest stronger export growth in the recent months, resulting in less drag from net US exports. Moreover, upward revisions to inventory investment suggest a stronger contribution from changes in private inventories. After this news release, we await any confirmation that the recent consolidation pattern is in fact accumulation for the start of an uptrend in the US dollar index.