· Euro bursts through resistance, dollar holds near 2-1/2 year low
The euro was headed for its best week in a month on Friday and has blown past major resistance levels as investors piled into bets the U.S. dollar has further to fall while the world begins to emerge from the Covid-19 pandemic.
The common currency is up 1.5% for the week so far and last sat comfortably at $1.2145.
Having finally breached $1.2000 after multiple attempts, momentum funds have surged in to long positions. The next serious chart resistance level is not until $1.2555.
** “The euro is holding above the $1.21 level for the first time since spring 2018, despite the fact that there is only a week to go before the European Central Bank is expected to add more policy stimulus,” said Rabobank strategist Jane Foley.
“There is no doubt that the actions of the Federal Reserve have been hugely successful at weakening the value of the dollar since the spring this year.”
The euro is also set for its best week against the Japanese yen in six months, even though the yen rose a little against a broadly weaker dollar on Thursday.
The yen was steady against the dollar on Friday, sterling held near a one-year peak and other majors eased a fraction, while Asian currencies advanced.
** Investors have turned heavily short dollars in recent months, figuring rates will stay low for a long time in the United States forcing yield-seekers to head elsewhere for better returns.
Even worries about a painful winter of deaths and lockdowns in the United States has failed to drive too much safe-haven demand for dollars, as investors reckon on more government support – either in the form monetary easing or fiscal spending.
Against a basket of currencies the dollar has shed about 12% from a three-year high of 102.990 in March, to hit a two-and-a-half year low of 90.504 on Thursday and held near that level on Friday.
Flow riders
Besides the euro, trade-exposed currencies in Asia have also surged over recent weeks as optimism about the region’s recovery gathering pace – especially with vaccines on the horizon drives flows in to assets from Seoul to Sydney and Singapore.
The Chinese yuan, an increasingly popular vehicle for investors to bet against the dollar, made a 29-month high of 6.5358 per dollar.
The South Korean won rose 0.7% to its strongest since mid 2018 as foreign inflows sent the Kospi equities index to a record high some 90% above its March lows.
The Australian and New Zealand dollars backed away slightly after hitting more than two-year highs on Thursday. The Aussie was last down 0.2% at $0.7427 and the kiwi softer by the same margin at $0.7061.
They are both on track for a fifth consecutive week of gains, a streak that has lifted the kiwi most of all and raised it some 8.6% above late-September lows.
Later on Friday, investors are looking to U.S. jobs figures due for the latest signs of the recovery losing momentum, while the fate of the pound is largely in the lap of Brexit trade deal negotiators who remain locked in talks.
· The pace of job gains likely slowed in November due to the impact of virus shutdowns
Job gains in November are expected to be weaker than in October, reflecting the impact of virus-related shutdowns by states and local governments due to the record spread of Covid-19.
Economists expect a consensus of 440,000 nonfarm payrolls were added in November, and the unemployment rate fell to 6.7% from 6.9%, according to Dow Jones. The total number of payrolls is likely to again be impacted by a sizeable drop in government jobs, due to layoffs of census workers by the federal government and cost cutting at the state and local level.
November could also be the last month to show significant job gains, until mid or late first quarter, when a large number of Americans should be vaccinated. Pfizer expects to begin providing its vaccine later this month, once it receives FDA approval, and Moderna is expected to receive approval soon after.
The employment report is released at 8:30 a.m. ET Friday.
· Biden says he has asked Fauci to stay on and join COVID-19 team
· Dr. Gottlieb: ‘Hopeful’ there will be adequate coronavirus vaccine supply in 2021
Former FDA Chief and Pfizer board member Dr. Scott Gottlieb told CNBC that he is “hopeful” there will be adequate vaccine supply in 2021, on the heels of a Wall Street Journal report that Pfizer had to cut its original estimates for the amount of vaccine doses this year because of supply-chain problems.
“The supply ramps very quickly as you move out and the more you push out that timeframe into 2021 by a week or two weeks, you have less supply in 2020,” Gottlieb said. “I’m hopeful that we’re going to have adequate supply in 2021 and it’s going to ramp very quickly, but hopefully these do get into the market this year.”
One American died about every 30 seconds from Covid on Wednesday, according to a CNBC analysis of Johns Hopkins data. The virus has killed more than 275,000 Americans, and the United States reported more than 2,800 deaths, the most in a single day since the pandemic began, according to Johns Hopkins. Hospitalizations have doubled over the past month. More than 100,000 people were in hospitals sick with Covid on Wednesday, an all-time high according to the COVID Tracking Project.
· Japanese PM Suga to hold news conference amid third coronavirus wave
Japan’s prime minister, Yoshihide Suga, is set to hold a news conference to provide an update on the country’s pandemic response on Friday, his first since coronavirus case numbers surged in November.
Suga is expected to explain his backing of a widely criticised travel subsidy campaign meant to help revive the economy amid infection controls.
In recent weeks, a third wave of the coronavirus has arrived in parts of the country, and some medical groups and experts blame it on a government campaign to encourage domestic tourism.
· Singapore to contribute US$5 million to COVAX, to help less wealthy countries access COVID-19 vaccines
Singapore will contribute US$5 million (S$6.67 million) to help bring COVID-19 vaccines to people in low- and lower-middle-income countries, the Ministry of Foreign Affairs (MFA) and the Ministry of Health (MOH) said in a joint statement on Friday (Dec 4).
The contribution will go towards the COVID-19 Vaccine Global Access (COVAX) Advance Market Commitment (AMC) mechanism, which will assist 92 countries in securing access to vaccines.
· Trump doubles down on $740 billion defense bill veto threat over Section 230 tech fight
President Donald Trump threatened again on Thursday to veto a colossal defense bill if lawmakers do not include a measure eliminating legal protections for social media companies.
· Pentagon blacklists China chipmaker SMIC and oil producer CNOOC
China’s largest chipmaker and national offshore oil and gas producer were added Thursday to a blacklist of alleged Chinese military companies, the Pentagon said in an evening statement.
The Department of Defense designated a total of four companies as being either owned or controlled by the People’s Liberation Army.
- Semiconductor Manufacturing International Corp.
- China National Offshore Oil Corp.
- China Construction Technology Co. Ltd.
- China International Engineering Consulting Corp.
The additional four companies added Thursday brings the total number of blacklisted firms to 35.
U.S. officials have long complained that Chinese companies are beholden to the People’s Republic of China and collect sensitive information on behalf of the People’s Liberation Army. The Chinese Communist Party has previously said that it does not engage in industrial espionage.
The Chinese Embassy in Washington did not immediately respond to CNBC’s request for comment.
· China's exports, imports seen expanding at faster pace in November: Reuters poll
China’s exports and imports are expected to rise at a faster pace in November, helped by strong demand and coronavirus-related disruptions at factories in other countries, a Reuters poll showed on Friday.
Exports are expected to have risen 12% from a year earlier, according to a median estimate of a Reuters poll of 24 economists, quickening from an 11.4% gain in October.
Booming sales of fridges, toasters and microwaves to households across the locked-down world have helped propel China’s mammoth manufacturing engine back to life, super-charging demand for key metals like steel, copper and aluminium, after a sharp slump early in the year.
Imports likely rose 6.1% on-year, also accelerating from the previous month’s 4.7% pace, buoyed by improving domestic demand and higher commodity prices.
China’s trade surplus is expected to have narrowed a bit to $53.5 billion in November from $58.44 billion in October, according to the poll. The data will be released on Monday.
· German industrial orders rise more than expected in October
German industrial orders rose more than expected on the month in October, data showed on Friday, raising hopes the manufacturing sector in Europe’s biggest economy started the fourth quarter on a solid footing during a second wave of the COVID-19 pandemic.
The Federal Statistics Offices said orders for industrial goods rose by 2.9% in seasonally adjusted terms, compared with a Reuters forecast for an increase of 1.5%. September’s figure was upwardly revised to an increase of 1.1%.
Figures from the Economy Ministry showed domestic orders rose 2.4% on the month while orders from abroad were 3.2% higher. Contracts from the euro zone increased by 0.5%.
A breakdown of the data showed that demand for both capital and intermediate goods had increased while demand for consumer goods had contracted.
· India’s central bank keeps interest rates unchanged as inflation remains high
India’s central bank kept its interest rates unchanged on Friday, in line with market expectations.
The Reserve Bank of India held its benchmark repo rate — the rate at which it lends to commercial banks — at 4%. Since January, the RBI has reduced that rate by 115 basis points.
The reverse repo rate, or the rate at which banks lend to the central bank, stood at 3.35%.
Reference: CNBC, Reuters
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