Market Commentary – December 11, 2020

Kevin Jock

11th December 2020

   After the much worse than expected unemployment claims data in the United States, dollar falls in early US session, reflecting the impact of current coronavirus pandemic. Pound fell as the possibility of Brexit increased. Euro increased after European Central Bank made the expansion and extension of Pandemic Emergency Purchase Programme (PEPP) as expected.

   The number of people claiming unemployment benefits for the first time in the United States for the week ended December 5 jumped by 137,000, compared with the previous drop of 71,000, to a total of 853,000, the highest since September, which was far more than market expectations. It rose to a total of 725,000, reflecting that the expansion of business closures under the pandemic has led to a new round of job losses. It is unlikely that the United States will introduce a new round of fiscal stimulus in the short term. Earlier, House Speaker Democrat Pelosi suggested that the debate over spending plans and aid for the new crown virus may continue until Christmas.

   The Australian Dollar has surged more than 1.3% against the US Dollar since the start of the week. AUD/USD advances above 0.756, highest since June 2018. The month high marks the biggest rise in five weeks.



Figure 1 (Source: IS Prime): AUDUSD – Daily Chart 

Headliner to Review

  • The European Central Bank will increase its emergency bond purchase plan by 500 billion euros to 1.85 trillion euros as expected, and extend it to March 2022, as the second round of lockdown measures dragged down the economic recovery in the euro zone. At the same time, the central bank also kept interest rates unchanged, with deposit interest rates at -0.5%, benchmark interest rates at 0%, and marginal lending rates at 0.25%.

  • In the United States in November, the average weekly real wages of private non-agricultural employees rose by 0.1% month-on-month; the year-on-year increase accelerated to 4.7%, higher than the previous value of 4.4%.

  • The U.S. Consumer Price Index (CPI) rebounded by 0.2% month-on-month in November, compared with the previous value of zero growth, which was higher than market expectations and rose by 0.1%. The core CPI rose by 0.2% month-on-month, compared with previous value of zero growth, the market expected to rise by 0.1%.

Headliner to Watch

  • In US, core PPI m/m expected to rise from 0.1% to 0.2%. PPI m/m expected to decrease from 0.3% to 0.1%. Prelim UoM Consumer Sentiment expected to decrease from 76.9 to 76.1.

  • In Euro Summit, EU leader will discuss further on COVID-19, Multiannual financial framework and the Recovery fund.

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Antony Tan
Ben Li
Kevin Jock