Stimulus Negotiations Remain In Focus
S&P 500 futures are swinging between gains and losses as traders wait for the results of stimulus negotiations.
Republicans and Democrats continue to work on the $900 billion coronavirus aid package. If they fail to reach an agreement today, they will have to pass a stopgap bill to avoid a government shutdown and provide negotiators with time to reach consensus on the details of the new package.Advertisement
Yesterday’s Initial Jobless Claims report highlighted the need for an additional round of stimulus, and the market believes that a new deal will soon be reached.
At the same time, traders may be reluctant to increase their bullish bets ahead to of the weekend so trading may be choppy during today’s trading session.Advertisement
UK And EU Have Little Time Left To Negotiate The Brexit Deal
Traders continue to follow challenging negotiations between EU and UK. Last weeks were full of contradictory signals on how these negotiations were progressing, but now they have reached the finish line.
According to EU chief negotiator Michel Barnier, the sides have just few hours left to reach a compromise deal if they want the new deal to work on January 1, 2021.
At this point, it looks like fisheries are the main obstacle on the way to the deal. While this segment has little economic weight, it is very sensitive politically in both EU and UK.
At this point, traders believe that negotiators will manage to find a way to deal with the fisheries issue, and a no-deal Brexit is clearly not priced in by global markets. If no deal is reached, the beginning of the next trading week will be very volatile.
U.S. Dollar Remains Under Pressure
On Thursday, the U.S. Dollar Index managed to get below the psychologically important 90 level and tested yearly lows at 89.75. Today, the American currency is trying to rebound, but its attempts to gain upside momentum look weak, and the pressure may increase when U.S. lawmakers reach compromise on the new stimulus bill.
The weak dollar is bullish for commodities like oil or gold and may also provide additional support to stocks which continue to trend higher ahead of Christmas.
The main risk is that shorting the dollar may become an overcrowded trade, but any dollar’s attempts to rebound since early November have been quickly met with strong selling pressure.