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Written by: Edward Moya | OANDA
US stocks are aiming for fresh record highs as stimulus payments arrive at American bank accounts and after the UK signed off on the COVID vaccine from AstraZeneca and University of Oxford. Risk appetite remains unfazed to the current dark period of COVID in the US that is recording over 3,000 daily deaths. Yesterday’s death toll was a record at over 3,700 lives lost, which included the passing of Congressman-elect Luke Letlow from Lousianna. It seems that devastating news on the COVID front for Wall Street is translating into rising expectations the Biden administration will provide more stimulus in the first 100 days. With the Fed anchored in all their extraordinary levels of accommodation, vaccine rollouts disappointment will keep the pressure on Congress to do more in the first quarter.
The S&P 500 index pared gains after reports Moderna's COVID vaccine shiptments to Texas were delayed by temperature issues.
Oil
Crude prices are little changed after the EIA crude oil inventory report posted the biggest draw since late October. US stockpiles fell 6.1 million barrels, more than the consensus estimate of 3.1 million draw. It was a bullish report as US crude exports increased to a nine-month high. The US shipped out 3.6 million b/d of crude oil last week, a 17% rise on a weekly basis, the third consecutive gain.
WTI crude initially rallied on a weaker dollar and bullish US stockpile report but that was short-lived on vaccine distribution disappointment. House Speaker Nancy Pelosi’s comments that the Trump administration is holding up vaccinations provided another reminder that Operation Warp Speed if falling well short of their goals. For the crude demand outlook to improve, vaccinations need to be happening a lot faster.
OPEC+ will not be in a rush to raise output as US crude production was unchanged. The battle for crude market share will be the story that accompanies the global economic recovery in 2021, but for now oversupply concerns are at ease.
WTI
Gold/FX
Gold’s bearish correction could be over now that prices are poised to have its first monthly gain since July. Gold has modest gains as the dollar takes another dive, but vaccine progress globally has stymied demand for safe-havens. Despite the recent breakthroughs with COVID vaccines, the rollout has been disappointing, and the current wave appears will force more restrictive measures over the next several weeks. Gold will shine in 2021 as economic disruption alongside a Biden administration should mean trillions of stimulus dollars are about to hit the economy.
Gold traders will closely watch the Georgia Senate runoff races that could deliver a surprise blue wave for the stimulus trade. If Democrats Warnock and Ossoff can both win on January 5th, the prospects of additional stimulus will become a reality and send the dollar further into freefall and driving gold towards the mid-$1900s.
Bitcoin
Bitcoin mania is running wild as bearish bets against the dollar rise to the highest levels since 2011. Macro crypto traders and haters of fiat currencies remain blindly ultra-bullish and that could help Bitcoin test the $30,000 level before the year ends. In the past Bitcoin would see weakness on regulatory concerns, but prices seem resilient despite the latest problems with XRP, at one-point last week was the world’s third largest crypto. Coinbase, a cryptocurrency exchange, decided to suspend trading in XRP after the SEC sued Ripple for illegally selling unregistered securities worth $1.3 billion. Regulatory fears have always posed a risk for Bitcoin, but for some institutional investors the price crash with XRP was a reminder that Bitcoin is best positioned to handle new regulatory restrictions.