Mid-Market Update: Upbeat Lagarde gives risk appetite a boost, Republican proposal DOA, Fraser makes history, Stockpiles rise, Gold higher on ECB but lower on Brexit

A hawkish ECB press conference and a slight miss with weekly jobless claims gave an “all-clear” signal for risky assets across the board.  Before today’s ECB spectacle, many analysts were expecting some hints that the pandemic bond-buying program will get a boost before the end of the year.  ECB President Lagarde noted that the ECB did not discuss an expansion of the 1.35 trillion-euro pandemic purchase program and isn’t eyeing a specific level for the euro, it is monitoring its impact on medium-term inflation.  The updated forecasts were mostly constructive with an upward 2020 GDP revision and an easing of deflationary concerns.   Currency traders are ready to resume their dollar bearish bets after the ECB showed for now they will not overreact to the euro’s strength. 

US stocks went on a rollercoaster ride, rising on an upbeat ECB, but giving back most of its gains on Brexit worries.  The tech-selloff appears to be over for now, so risk aversion should not get out of hand.    

Claims

Jobless claims confirms the labor market rebound has hit a brick wall and it will probably take a few more lackluster readings to force Washington DC to do something. Both initial jobless claims and continuing claims came in higher than forecasts. Claims surged in California, Texas and Louisiana. Claims still remain elevated and this pretty much confirms the Fed is going nowhere.

Fraser

Citigroup’s naming of Jane Fraser as their next CEO is a historic moment for Wall Street.  Fraser, the firm’s retail banking chief will be the first woman to run a megabank.  She will replace CEO Michael Corbat who is retiring in February. 

Fraser is shattering a glass ceiling that has been in place way too long.  Her qualifications made this an easy decision and that is why Citi promoted her last year to president, their second-highest post.  A good part of 2020 is about bridging the many inequality gaps that exist and this appointment will resonate very well for some investors. 

Symbolic Vote

The Republican’s slimmed-down coronavirus relief proposal, a symbolic vote that is widely expected to get voted down by the Senate.  The GOP needs 60 votes, but Democrats have signaled they will reject it.  The $500 billion proposal shows the key impasse remains in place and it seems Washington will turn their attention to making sure federal agencies have funding secured before the end of the month.  President Trump will likely resort to executive orders to provide some support to the economy, but that won’t suffice.  Pressure is building on Capitol Hill, but it seems we need to see economy deteriorate further to break the deadlock.  

Oil

Oil prices were unfazed after US stockpiles unexpectedly rose by 2 million barrels and as Saudi crude imports dropped to the lowest level since 2010.  Crude production is starting to return following a couple of storms, but a weak demand outlook and the start of maintenance season will keep the pressure oil prices.   Crude prices will likely take its queue from the dollar and right now European crosscurrents signal a choppy road ahead. 

Gold

Gold bulls rejoiced after ECB Chief Lagarde delivered an upbeat press conference that emphasized their projections don’t foresee deflationary risks.  Gold surged after the ECB paved the way for a stronger euro, forecasted next year will see an acceleration in price growth, and after delivering a significant upward revision for the 2020 euro-area GDP forecast. 

Gold however gave back most of its gains after Brexit worries sank the British pound and gave the dollar a bid.  It seems the UK is willing to take the risk of a no-deal Brexit and that means the dollar won’t break in the short-term. 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst - The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geopolitical events and monetary policies around the world. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC and Bloomberg, and is often quoted in leading publications including the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University.
Ed Moya