Market Analysis Today – Stimulus package expectations support investor sentiment
European markets are set to open higher despite some Italian political noise. Despite the headlines, it seems unlikely a snap election will be called, so there should be minimal impact on broader risk.
In the US, investors are waiting for the stimulus deal to be unveiled today, which could be in the region of $2 trillion. Details around infrastructure spending are unlikely today but would be positive if included.
A huge price tag but on second thought, and let’s face it most likely to be watered down.
The news is helping to support broader macro risk, with rates higher and commodities mostly higher but not explosively so.
The Democrats’ narrow majorities in the houses of Congress – including the narrowest of margins in the Senate – meaning it will be hard to get the full bill through.
EURUSD upside limited
The US dollar surged briefly overnight on a report that US president-elect Biden could announce a proposal for a fiscal stimulus package of as much as $2 trillion today. This could keep USD supported and provide room for further USD short unwinds.
There has been an increase in downside supply in the past couple days in the cash space. Besides, the EUR leg of EURUSD is starting to come under a bit of pressure, with Italy’s political situation escalating.
Matteo Renzi has pulled out of the ruling coalition, and PM Conte is trying to form a new coalition.
In the short term, this probably won’t weigh on the euro to a great extent, but it adds to the overall outlook. The upside in EURUSD could therefore be limited.
Oil markets
At least something makes sense oil is a little bit higher. I think the talk of an oil super-cycle is hyperbole, and while a low-price environment seems to be behind expecting prices to grind higher as more countries approve and roll out the vaccine.
Market Analysis Today – Stimulus package expectations support investor sentiment
