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Top 5 Things to Watch This Trading Week


November 30, 2020
“Eventful” does not even begin to describe the agenda of the week after Thanksgiving. Big US data releases will flood the markets in the coming days, with November’s job report capturing most of the attention.
Top 5 Things to Watch This Trading Week

However, market sentiment will also be greatly influenced (perhaps even to a greater extent) by news about the timing of vaccine distribution and any restrictive measures to stem the spread of the virus after the Thanksgiving long weekend. Traders will also be closely watching the testimonies of Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin on the CARES Act.

In other news, OPEC+ is expected to delay its plans to increase oil output when it meets this week. Meanwhile, in Europe, expectations are that the European Central Bank will step up its stimulus measures at its upcoming policy meeting. Here is what you need to know at the beginning of the trading week.

 

When will we have a vaccine?

Probably soon. The UK is set to become the first western country to approve a COVID-19 vaccine within days. British health officials are pushing for the approval of the Pfizer-BionTech vaccine in the UK as soon as possible. The first inoculations could take place as of 7 December. The country ordered 40 million doses of the two-shot vaccine which was shown to be 95% successful.

Moderna and AstraZeneca vaccines were also found successful this month, giving the world a few more reasons to cheer and priming the stock markets for an unprecedented rally. In response, the Dow Jones Industrial Average (DOW30) hit 30,000 for the first time in history. The S&P500 and NSDAQ100 performed remarkably well in the past week also, closing 0.13% and 0.24% higher.

 

All Eyes on the Non-Farm Payrolls

The steep escalation in infection cases across the US has raised concerns around the tightening of measures which has impacted the recovery of the labour market. The NFP data release will be closely eyed. Due Friday, the NFP report is, however, expected to show an increase in job figures in November. The consensus revolves around 500,000 non-agricultural jobs, while the unemployment rate is seen edging lower to 6.8% from 6.9% in October.

In October, 638,000 new jobs were created, which was the smallest gain since the recovery seen in May. The ISM Manufacturing and Non-Manufacturing PMI releases due on Tuesday, as well as the ADP Employment Report coming out on Wednesday followed by the initial jobless claims on Thursday will complete the fundamental picture surrounding the US dollar.

 

Power to Powell as Mnuchin Changes Gears

Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin will testify before the Senate Banking Committee on 1 December and a day later, before the House Financial Services Committee.

The main topic on the agenda will be the CARES Act, whereby the Congress allocated  $2 trillion to the US Treasury, as pandemic aid.  A great proportion of this amount was set aside for the Fed lending programmes.

Earlier in the month, Mnuchin surprised the public opinion by requesting that any unused funds be returned to the Treasury. Had it not been enough already, he also declined to extend the Fed lending programmes. The central bank perceives this as a critical setback for the economy, which has seen the worst downturn in a century.

The move has put the descending Trump administration in the balance with the Fed and will likely add to the economic agenda highlights as Democratic President-elect Joe Biden is poised to take office.

 

What to Expect from the OPEC+ Meeting?

OPEC and its peers, including Russia, known as the OPEC+, had been expected to ramp up oil output by 2 million barrels per day since January 2020 to ease the record supply cuts that were implemented earlier in the year.

Yet against all odds, when OPEC+ meets between 30 November – 1 December, energy analysts envision more delays on the oil producing country “watchdogs” led by Russia. The common belief is that OPEC+ will put off its plans by at least 3 more months.

Crude oil prices have seen a remarkable recovery to eight-month tops near $50 per barrel. Nevertheless, the continued spike in coronavirus cases, travel restrictions and the still high inventory levels alongside increased output from Libya are all signals of a short-lived bullish trend.

 

Inflation Data Sets the Tone in Europe

In Europe, investors lie in wait for the Eurozone inflation data due Tuesday. Analysts’ expectations revolve around a 0.2% Eurozone inflation decline in November, year-on-year.

The European Central Bank has already expressed its estimation, which points to an average 0.2% drop in inflation, on a yearly basis, in the last quarter of 2020. However, negative price growth for a fourth consecutive month will likely pull some alarm signals. ECB economist Philip Lane has recently warned against reduced tolerance for low inflation.

Overall, the reading is expected to underscore the need for more stimulus in anticipation of the ECB’s last policy meeting of the year in December. Analysts are already anticipating an expansion of the bank’s bond buying programme and more leeway for banks to sustain cheap loans.

Ahead of the big data release, EURUSD neared 1.20, which is seen as a line for consolidation drawn by the ECB. Whether it will break higher or pull back is an open question at the time of writing.

More later. Watch this space for updates.


Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

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