European futures are trading lower as investors are concerned that a trade deal may not be reached on Brexit this week. Traders were hopeful about Boris Johnson’s travel to Brussels, and the hope was that both sides, the EU and the UK, would be able to agree on some sort of agreement. However, his meeting with the EU commission wasn’t as fruitful as hoped yesterday. Fishing rights are the main elephant in the room. However, there is still hope that there may be some last-minute deal.
The ECB Day
Traders are unlikely to place heavily bullish bets as the European Central Bank announces its monetary policy decision. One thing that is clear is that the second coronavirus wave has slowed the economic recovery process, if not derailed it entirely. Market players expect the ECB to acknowledge this factor again and make appropriate adjustments to take some additional monetary policy steps that should include expanding its stimulus programme. No one expects that the ECB will touch its interest rate as it is already at an all-time low. The fact is that there is no need to touch the most powerful tool yet as we now have the coronavirus vaccine, which should limit the damage. Most of the businesses, smaller to a bigger size, have issues with their liquidity, and if the ECB can resolve their problems, it will save them from a much bigger headache—bankruptcies among businesses, which is going to have a profound influence on the banking system.
Gold: Unemployment Claims & Stimulus
Gold prices came under immense selling pressure yesterday as hopes for the second stimulus package dimmed. The House granted a one-week extension of federal government funding so that the US lawmakers can agree on a common point in relation to the aid package. However, it doesn’t look like the US economy is going to see another stimulus package anytime soon, because US Senate Majority Leader Mitch McConnell wasn’t optimistic yesterday. The fact is that the absence of the stimulus package represents a mammoth risk for the US economy as businesses are struggling due to the rise in coronavirus cases. Therefore, selling gold at current levels may not be the best strategy, as investors are likely to move away from riskier assets.
One particular economic event that is highly likely to influence today’s gold price is the upcoming unemployment claims data. The data has taken a wrong turn, and it may not be a wrong statement to say that we are seeing a new trend under which the labour conditions are deteriorating. If today’s number confirms this pattern, it is highly likely that we may see an upward move for the gold price. The forecast for the unemployment claims is 723K, while the previous number came in at 712K. On the economic docket, we also have the CPI and Core CPI numbers and the forecast for both numbers is 0.1%. These numbers are unlikely to move the gold price.
Oil Oil prices have started their upward move once again on the back of vaccine hope. The fact that the coronavirus vaccine process has started to be rolled out in the UK has strengthened the hope for oil demand. The US is also likely to give the green light for the coronavirus vaccine soon, and this should further help the oil demand. At the same time, traders are also nervous about the oil supply as two Iraqi oilfields