On November 20, the US dollar rose in Europe, euro To USD Decline, the escalation of tension between Italy and the European Union around the budget put pressure on the euro; pound To USD The prospect of Brexit depressed sterling. Bank of England Governor Carney said that the high risk of Brexit without agreement was disturbing. Gold prices rose for the sixth consecutive trading day, with spot gold hitting a new high of 1228.84 US dollars/ounce since November 7. The global stock market turmoil triggered investors' demand for risk aversion. Oil prices fell sharply, and oil distribution fell by more than 2%, as the deteriorating demand outlook and the jump in US production overshadowed supply concerns.
1 [Bank of England Governor Carney: The high risk of leaving Europe without agreement is disturbing]
Bank of England Governor Carney said that the high risk of Brexit without agreement is disturbing. The analysis of Brexit by the Bank of England will focus on the policy time frame of the Bank of England rather than long-term prediction. He is confident that the Bank of England has sufficient measures to ensure financial stability. At present, the implied volatility of sterling is very high. In the case of Brexit without agreement and without a transition period, The real problem will arise in the real economy. If the fall of sterling leads to further excessive demand, interest rate hikes will be considered. There is also a possible scenario of interest rate cuts after Brexit.
2 [If the text of the Brexit Agreement is not modified, Spain will vote against the agreement]
Spanish Prime Minister Sanchez said that if the text of the Brexit Agreement was not modified, Spain would vote against the agreement
3 [German Finance Minister Scholtz: Italy must face the reality that the euro zone has its own rules]
German Finance Minister Schaltz said that Italy must face the reality that the euro area has its own rules, and the idea of the euro area budget is widely supported within the EU.
4 [Haldane, Chief Economist of the Bank of England: Brexit may lead to a decline in performance in the fourth quarter]
Haldane, the chief economist of the Bank of England, said that seeing the growing impact of Brexit on corporate behavior may lead to a decline in performance in the fourth quarter. Brexit without agreement will immediately impact on supply and may also impact on demand.
5 [Bank of Japan Governor Yoshihiko Kuroda ruled out the possibility of ending negative interest rate policy in the near future]
Bank of Japan Governor Yoshihiko Kuroda ruled out the possibility of abandoning negative interest rates in the near future, saying that it is necessary to accelerate the inflation rate to reach the target of 2%. Kuroda also said that there is no need to expand stimulus measures, believing that the current ultra loose policy is enough to accelerate the pace of inflation rising to the target level of the central bank.
6 [According to the minutes of the Federal Reserve of Australia's meeting, policy officials said that the unemployment rate may further decline significantly]
The Federal Reserve of Australia gave a more optimistic view of the country's economy, saying that the unemployment rate may "significantly decline", although the current US China trade friction poses a major threat to the global outlook.
Summary of quotations in Europe
In Europe, the US dollar rose, hitting a new intraday high of 96.39. However, the cautious view of the Federal Reserve on the global outlook and weak data in the United States both raised questions about whether the Federal Reserve would slow its interest rate rise.
New York Federal Reserve Chairman Williams said that we may raise interest rates, but it is really necessary in the context of a very strong economy. The Vice Chairman of the Federal Reserve Clarida and the Chairman of the Dallas Federal Reserve Copeland said last week that they were worried about the possible slowdown of the global economy. This factor has led the market to bet heavily on the end of the interest rate rise cycle, even if senior officials of the Federal Reserve hinted that more interest rate rises would be carried out.
However, some analysts believe the dollar will make a comeback. Ray Attrill, head of foreign exchange strategy at National Australia Bank (NAB), said Williams' comments were reasonable, but not as dovish as those made by Clarida and Copeland last week. The market may reflect on whether the comments made last Friday were interpreted too dovey, which may lead to the reversal of the weak trend of the US dollar.
At a time when the relationship between the EU and Italy was strained due to the budget proposal, with the decline of European stock markets, Italian bank shares fell to a two-year low, and Italian government bonds suffered another sell-off. The euro fell against the dollar, almost giving up all of its gains yesterday, and it is now trading near 1.1410.
Alvin Tan, an analyst at Societe Generale, said that the decline of the euro was mainly driven by the atmosphere. The European market opened weaker, and Italian risks remained, which did not help the euro.
Italy insists on a 2.4% budget deficit, while the EU requires it to be reduced to 2%. There are signs that the tension between the government and the EU around its 2019 budget has escalated. The yield of Italian government bonds hit a one month high on Tuesday. The yield of Italian government bonds rose as high as 13 basis points, the yield of five-year bonds rose to 2.97%, and the yield of 10-year bonds rose to 3.70%. This pushed the spread of Italian 10-year bonds over Germany to 333 basis points, the widest in a month. Italian Finance Minister Jean Claude Tria said that the rise in the yield difference between Italian and German government bonds was "clearly worrying".
The Bank of Tokyo Mitsubishi UFJ discussed the prospect of the euro against the dollar, and believed that the recent dove language issued by the Federal Reserve officials provided some support for the exchange rate, but the short-term upward space is still limited; The Federal Reserve is expected to raise interest rates again in December, but these more dovish comments have raised the probability that the Federal Reserve will consider suspending the pace of interest rate increase in 2019, rather than raising interest rates once a quarter so far this year, which is more in line with the bank's expectations for the Federal Reserve to raise interest rates, and it is expected that the strong dollar will gradually weaken next year; However, the euro itself still faces selling pressure, which will limit its upward space. On Friday (November 16), the speech of the Federal Reserve officials pushed up the euro, focusing on Italy's budget issues and the progress of the Brexit negotiations. Against this background, it will be difficult for the euro to rise significantly against the dollar.
The British pound fell against the US dollar in Europe due to the decline of risky assets and concerns about Brexit negotiations. Spanish Prime Minister Sanchez said that if the text of the Brexit Agreement was not modified, Spain would vote against the agreement.
On Tuesday, Bank of England Governor Carney was asked whether he would vote for or against interest rate hikes in the event of Brexit without an agreement. Carney replied that it depends on the situation and needs to consider supply and demand, exchange rate and other factors. If there is more excess demand with the decline of sterling, it is expected to raise interest rates; There is also a need to cut interest rates; Brexit without agreement is unlikely to lead to a major negative supply shock.
Carney said that the high risk of leaving Europe without an agreement is disturbing. The Bank of England believes that it has taken all possible measures to ensure financial stability, and will consider the impact of political trends as much as possible in its exit analysis. The Bank of England's exit analysis will focus on the Bank of England's policy time frame, rather than long-term forecasts. An agreement that makes the future clearer will help investment rebound.
The research team of Dominion Securities said that the concern of Brexit was still the focus of sterling and would wait for whether the Tory Party would meet the 48 letters needed to trigger a vote of no confidence in the leadership of Teresa May. Until the political risk abated, the upward resistance was still quite strong.
HSBC Holdings pointed out that there are two downside risks facing sterling against the US dollar at present. One is the increasing possibility that the Brexit agreement cannot be passed in parliament, and the other is that the time for Brexit negotiations is about to run out, and the possibility of Brexit without an agreement is growing.
In the near future, British Prime Minister Theresa May may encounter a vote of no confidence. If she wins, the pound is only a temporary consolation, because this result cannot guarantee that the Brexit Agreement will be passed in Parliament. If she loses, the new Prime Minister may take a tougher negotiating position. But most importantly, no matter who is in power, there is not enough time for negotiations, The result of leaving Europe without agreement should come or will come.
Precious metals: risk aversion rises, gold prices rise
In Europe, gold prices rose, with spot gold hitting a new high of 1228.84 US dollars/ounce since November 7. The sharp decline in Asian stock markets triggered investors' demand for risk aversion. In addition, short-term interest rate pressure continued to ease (the 10-year US bond interest rate fell to 3.05%), which also supported gold prices to some extent.
The November metal report released by the Bank of Nova Scotia shows that the gold price still has the potential to rise. It is expected that a new wave of risk aversion will sweep the financial market and the inflationary pressure will rise; The overall economic data showed weakness, including some US data. The price of base metals was still under pressure due to the US trade dispute. As other markets became more risk averse, the gold market would be supported. With the stock market and bond market plummeting, the demand for gold as a hedge had more room to rise.
Uncertainties in economic growth prospects and geopolitical instability will continue to drive up inflationary pressures, which will help the gold price fight against the strong US dollar. The gold price and the US dollar rose together in October. The further strengthening of the US dollar may not pose too strong a headwind for the gold price. The inflection point of the gold price is approaching, which may have arrived at present.
However, Hussein Sayed, chief market strategist of FXTM, pointed out that gold would continue to consolidate in the range of $1200-1250/oz before the emergence of new catalysts. The new catalyst may be the Brexit negotiations or the progress of the G20 meeting between the United States and China. If you hear more dove talk about the tightening cycle, it will drag down the dollar, thus boosting gold again.
Sayed, Fed policymakers raised concerns about the possible slowdown of the global economy, causing the market to doubt how far the tightening cycle can go, so the dollar continued to retreat and weaken; So far this year, the Federal Reserve has raised interest rates three times, making the holding cost of interest free income gold higher. It is expected that the fourth interest rate increase will be carried out next month.
International oil market: oil price plummets, economic outlook deteriorates and the impact of US production jump overshadowing supply concerns
In Europe, oil prices fell sharply, oil distribution fell by more than 2% at one time, breaking the intraday low to 65.44 dollars/barrel, and US oil broke the intraday low to 56.11 dollars/barrel. The deterioration of the economic outlook and the jump in US production offset the impact of the Organization of Petroleum Exporting Countries (OPEC) expected to reduce production.
The oil price has dropped by nearly a quarter from the recent high hit in early October. Due to the substantial increase in supply, especially the US oil supply, the US crude oil production has increased by nearly 25% this year, reaching a record high of 11.7 million barrels per day.
Benjamin Lu of Huili Futures said that the oil price reversed the earlier rise in the day, the upward potential was not stable, and the bull trend lost momentum.
Worried about overcapacity, OPEC is pushing the organization and its allies to cut supply by 1-1.4 million barrels per day. BNP Paribas expects that OPEC will agree to cut supply at the next formal meeting held on December 6. The bank also said that it is expected that Brent crude oil will rebound to $80 per barrel by the end of the year. It is expected that the average price of U.S. oil will reach $69 per barrel in 2019, and Brent crude oil will be $76 per barrel.
At present, the threshold support of US $55 for American oil and US $65 for oil distribution is still strong. On the whole, the recent monthly crude oil gap and gasoline gap have stabilized. However, the main positive support for the market is OPEC's production reduction in December. Only OPEC's production reduction of 1.5 million barrels/day can prevent the deterioration of the balance sheet next year, and it is obvious that Saudi Arabia cannot bear the 1.5 million barrels/day, On the issue of production reduction, Russia's attitude is particularly critical. If Saudi Arabia cannot cooperate with Russia to reduce production, the effect of production reduction will be greatly reduced. But at present, Russia's attitude towards production reduction is ambiguous, and its recent statement still needs to be observed.
