Macro Roundup (Jan 7)

Published: Jan 07, 2021 09:00 (GMT+8)
The dollar bounced after sinking to its lowest level in nearly three years on Wednesday, with markets anticipating a Democrat win in the U.S. Senate election in Georgia that would clear the path for a larger fiscal stimulus package.

SHANGHAI, Jan 7 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The dollar bounced after sinking to its lowest level in nearly three years on Wednesday, with markets anticipating a Democrat win in the U.S. Senate election in Georgia that would clear the path for a larger fiscal stimulus package.

Democrats won one U.S. Senate race in Georgia and led in another on Wednesday, edging closer to a sweep in a previous Republican stronghold that would hand them control of Congress and the power to advance President-elect Joe Biden's policy goals.

Analysts generally expect a Democrat-controlled Senate to be positive for economic growth globally and thus for most riskier assets, but negative for bonds and the dollar as the U.S. budget and trade deficits swell even further.

As markets priced in the Democrats winning both Georgia seats, the dollar index hit its lowest since March 2018 at 89.206, but rebounded to last trade up 0.015% at 89.48.

On Wall Street, US stock futures rose slightly in overnight trading on Wednesday as investors digested the likely event of a Democratic held Congress and continued to shrug off riots at the U.S. Capitol.

Dow Jones Industrial average futures rose 58 points. S&P 500 futures gained 0.25% and Nasdaq 100 futures added 0.35%.

Markets were largely unaffected by the chaos in Washington Wednesday caused by pro-Trump rioters at the U.S. Capitol. Lawmakers had just started the procedural process of counting the Electoral College votes and formally declaring President-elect Joe Biden the winner, when protesters stormed the chamber.

US officials later said on Wednesday evening the Capitol building was secure after the protestors were cleared. And a member of Senate leadership told NBC News that Senators are determined to stay until counting the electoral votes is done.

Oil prices extended gains on Wednesday, rising to their highest since late February, after Saudi Arabia announced a big voluntary production cut, and as U.S. crude inventories declined in the latest week.

Brent crude gained 32 cents to trade at $53.92 per barrel, meanwhile U.S. West Texas Intermediate crude futures settled 70 cents, or 1.4%, higher at $50.63 per barrel.

Both contracts were up about 5% on Tuesday.

U.S. crude stocks fell sharply while fuel inventories rose, the Energy Information Administration said on Wednesday, and 2020 came to a close with a sharp decline in overall demand due to the coronavirus pandemic.

Gold fell 1% on Wednesday, after earlier climbing to a near two-month high, as the dollar pared losses, while investors focused on the outcome of the U.S. Senate run-off election in Georgia.

Spot gold was down 0.8% to $1,934.72 per ounce, having earlier hit a near two-month peak at $1,959.01. U.S. gold futures dipped 0.9% to $1,937.20.

“Given gold's moves in the last couple of days and just how overextended the dollar decline looks, we could just be seeing some profit taking and a bit of a technical correction,” said OANDA analyst Craig Erlam.

“Gold has traded at notable resistance over the last couple of days around $1,950-1,960 and we may just be seeing a pullback.”

Euro zone economic activity contracted more sharply than expected in December, final composite purchasing manager's index (PMI) data revealed on Wednesday. December's reading came in at 49.1, an increase from November's 45.3 but significantly below an earlier flash estimate of 49.8. Anything below 50 indicates a contraction.

Here's a look at what's on tap:

China: foreign exchange reserves in December

Euro zone: Initial value and monthly rate of CPI annual rate in December, December industrial prosperity index, final value of consumer confidence in December, December economic prosperity index and monthly retail sales rate in November

US: Challenger Job Cuts for December, Initial Jobless Claims as of January 2, November Trade Account and ISM Non-Manufacturing PMI for December

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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