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Written by: Edward Moya | OANDA
Stocks are off to a solid start after President Trump unexpectedly signed the $900 billion stimulus bill and as the EU begins its mass vaccination program. Trump may have started to feel the public pressure of preventing Americans unemployment aid and for a government shutdown. The unnecessary drama may have cost millions of Americans a week of unemployment aid and the reason is possibly so that the President could say he pushed for larger stimulus checks. The Republican party now needs to respond to President Trump’s request, which is supported by Democrats, to provide Americans with $2000 stimulus checks. It seems unlikely that Congress will approve Trump’s demand for bigger checks and cuts for foreign aid.
Trading volumes are especially thin today as Australia, Canada, New Zealand are closed for Boxing Day.
With just over a week until the Georgia Senate runoff races, investors are still pricing in a V-shaped recovery thanks to the COVID-19 vaccine rollout, but a potential blue wave could accelerate the rotation into cyclicals. The base case for Georgia is that Republicans will manage to win one of the races and keep control of the Senate. The Biden administration’s chances of another economic relief package remain elevated as President Trump has moved the goal posts for Republicans.
Baba
Alibaba dropped for a second consecutive day on fears China’s regulatory crackdown is just beginning. Last week, Alibaba shares were under pressure for a probe on monopolistic practices and now it looks like their finance affiliate, Ant group was told by China’s central bank to go back to focusing only on digital payments. Alibaba also announced an increase to their stock buyback program of up to $10 billion.
China could be making an example of Jack Ma, but this potentially politically based attack could really do harm for their growing tech industry.
GBP
The devil is in the details and the UK’s trade deal is producing a scramble for businesses to adjust to new terms and conditions over a short period of time. The economy will have some bumps and bruises as the economy battles COVID lockdowns and adjusts to new goods and service trade rules. While punitive tariffs appear to have been avoided, fair competition could end up seeing the UK levied with proportionate tariffs.
Oil
Crude prices edged higher as the EU’s mass vaccination campaign begins and as risky assets across the board benefit from President Trump’s signing of the stimulus package. WTI crude should struggle to break above the $50 level as next week’s OPEC+ meeting next week should be a tense one. Lockdown efforts have mostly been intensified but that is not preventing the Russians from pushing for output hikes in February.
The crude demand outlook appears to be intact despite a new virus strain, which appears will not derail the current vaccine rollouts. Thin trading conditions should see oil prices consolidate for the rest of the week, but risks for a dollar rebound and nervousness ahead of next week’s OPEC gathering could provide some headwinds.
Gold
Gold is on a rollercoaster ride this morning. Gold prices initially were boosted after President Trump unexpectedly signed the pandemic-aid bill last night. It seems likely Americans will only get direct payments of $600 and not the $2000 that Trump was demanding. That is one of the reasons why gold’s rally to $1,900 was faded.
Gold could consolidate until after the Georgia Senate runoff races, the next biggest risk event that will determine the outlook for stimulus for President-elect Biden’s first 100 days. The backbone for many gold buyers is the $14 trillion increase to global money supply, a strong reminder that despite the rebound in yields, we will remain in a low interest rate environment for years to come.
Bitcoin
Bitcoin demand remains relentless as institutional investors scale into their medium and long-term bets. Millions of dollars are going into the cryptoverse and money managers just can’t buy it all at once. Bitcoin is still the trendy trade on Wall Street and that might not go away as many new retail traders have loss confidence with fiat currencies.
After tentatively breaking past $28,000, Bitcoin has settled closer to the $27,000 level. Bitcoin volatility remains elevated, but for now seems like it will attract buyers on every major dip. Eventually, light holiday-week trading conditions should support a consolidation phase for before Bitcoin breaks beyond the psychological $30,000 level.
Written by: Trump Stimulus Shocker