US Market Optimism with Vaccine Approvals and possible US Stimulus Deal
Weekly Market Update 4 Dec 2020 – US Market Optimism with Vaccine Approvals and possible US Stimulus Deal
1. While November non-farm payrolls were much softer and US companies added significantly lesser jobs than forecasted, USD rallied sharply higher instead of falling. This shows that the market expects the pent-up demand from the positive vaccine developments as well as the new US stimulus deal will boost recovery in 2021.
2. All eyes will be on the upcoming ECB monetary policy announcement this coming week, which is expected to lower economic projections and ease monetary policy. Last week, EUR rose to its strongest level in recent years. With major countries in EU seeing COVID-19 infection curves flattening, the potential easing could be sufficient while ECB monitors the situation before determining if another round of stimulus is necessary
3. GBP hit a new 2.5 year high due to several positive news – better than expected construction sector PMI, falling new COVID-19 virus cases and plans to start easing restrictions. However, the primary driver is still hope that there would be a last-minute Brexit deal, as Prime Minister Boris and European Commission President Ursula will speak directly to work out a deal after failed agreements in London this week
