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The US dollar broadly declined against other major currencies. Even the USD/JPY pair, which has been rather stable over the past days finished the day in the red. This allowed emerging market currencies like the Russian rouble (RUB) or the Indian rupee (INR) to clearly gain against the greenback. The USD/INR pair was trading by Wednesday morning at the lowest level since early September.
After a bullish trading session on Tuesday, major equity indices opened mostly unchanged or somewhat in the red by Wednesday morning. Investors will be watching not only the response by governments to the pandemic but also the developments on the vaccine front. There are concerns than vaccines against COVID-19 might not be as effective against later mutations, such as the South African strain and vaccine manufacturers like Moderna are working on boosters to work also against those type of viruses.
On Wednesday data on durable goods new orders from December can be expected from the US, as well as the State Street Investor Confidence Index. Later the FOMC announces its interest rate decision. Later from Japan data on retail sales in December will come in.
Given the weakness of the dollar, the EUR/USD pair was able to recover from the downturn on Monday and traded again at the upper 1.21-levels by Wednesday morning with the support at around 1.211 remaining in place for the time being.
US data on house prices indicated a continued resilient growth as the S&P/Case-Shiller index was up by 9.1% in November and the FHFA HPI increased by 11% compared to the previous year. Meanwhile the Richmond Fed manufacturing Index was reported lower at 14 compared to 19 at the previous reading.
The key event on Wednesday could be the conclusion of the January meeting of the FOMC. There is practically no expectation that at this time rates could be adjusted and most analysts expect that the bond buying programs (i.e. quantitative easing) will stay in place with rather few changes.
European indices like the Germany 30 closed significantly higher, erasing practically all losses from the previous trading session following the positive sentiment in the global markets.
One of the best-performing stocks in the index was the enterprise resource planning software company SAP, which continued pushing higher, gaining more than four per cent on Tuesday. Earlier on Monday the company announced a further cooperation with Microsoft, while some analysts see the recent surge to a new 3-months high driven by technical chart factors. Three months ago the stock tanked by 22 per cent in one day after disappointing quarterly results, which in turn means that to the upside relatively few established resistance levels might be encountered at current rates.
On Wednesday the GfK consumer climate index will be released. More important fundamental data will be released also in the following days as on Thursday the consumer price index (CPI) and on Friday unemployment and GDP figures can be expected.
Oil prices ended the day on Tuesday almost unchanged, with the gains from the morning hours erased later in the afternoon. Later oil prices were somewhat supported by the bigger than expected draw in oil stockpiles according to weekly data from the American Petroleum Institute (API), which reported a draw on crude oil inventories of 5.27 million barrels. However, gasoline stockpiles increased unexpectedly by 3.06 million barrels.
Policies also had their potential impact on oil prices, such as the ban by the new US government for new oil explorations on federal lands but also the increased number of restrictions in China meant to curb the spread of COVID being factors to consider as impacting supply and demand.
On Wednesday the Energy Information Administration (EIA) will also release its weekly change in crude oil, gasoline and distillate stockpiles.
Sentiment in the stock market was quite mixed. While the US 500 index managed to reach a new all-time high, most of those gains were lost by Tuesday afternoon. In contrast, the US Tech 100 index closed at yet another clear record-high.
One of the best performing stocks in the market was Virgin Galactic (+17.13%). Some see positive discussions among investors and speculations that the stock could be mentioned by Ark Investment as one of the factor driving up valuations.
In after-hours trading Microsoft jumped higher following a better-than-expected fiscal Q2 with earnings-per-share at $2.03 clearly exceeding expectations and the company’s cloud offering showing resilient growth. Also, the fact that the company already went through many antitrust proceedings could make some assume that it is better positioned compared to other tech giants like Alphabet and Facebook, which are facing increasing regulatory scrutiny.
On Wednesday earnings from companies including AT&T, Boeing, Facebook, Tesla and Apple can be expected.
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