Here is what you need to know on Wednesday, December 16:
The dollar remains on the back foot after a cheerful Tuesday in markets. The upcoming approval of the Moderna vaccine, progress on Brexit, and Republicans' call to seal a stimulus have all resulted in a risk-on atmosphere. Investors eye changes in the Federal Reserve's bond-buying scheme in its last decision of the year.
US stimulus: Senate Majority Leader Mitch McConnell noted progress in stimulus talks with Democrats and urged all lawmakers to come together around a deal. The powerful politician had been reluctant to back an accord and the new proposals are yet to receive the nod from House Speaker Nancy Pelosi. Investors expect another relief package when President-elect Joe Biden enters the office. McConnell also broke his silence on the elections and congratulated Biden, relieving some political pressure.
The Federal Reserve is set to announce its final decision of the year and markets are watching changes in its bond-buying scheme amid the recent virus surge and economic slowdown. Nevertheless, the bank may opt to wait until the next meeting. Special attention will be given to the new economic forecasts, especially growth and employment.
Gold is holding onto its gains above $1,850 in response to fiscal stimulus news and hopes for monetary stimulus.
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Ahead of the Fed, US Retail Sales figures for November are set to rock markets as consumption is a critical component of the world's largest economy. Headline sales are forecast to drop while the Control Group is set to edge higher.
Another figure to watch is Markit's preliminary Purchasing Managers' Indexes for November, a forward-looking indicator of the world's largest economy.
Intense Brexit talks continue in Brussels and negotiators are quiet, a sign of progress. Reports in London suggest substantial progress on a Level-Playing Field while the fate of fisheries remains contentious. At some point, rumors of an imminent deal surfaced, but they failed to materialize. GBP/USD is holding onto its gains.
UK labor figures were mixed with a low unemployment rate yet a substantial jump in the jobless claims. Inflation missed expectations with an increase of 0.3% yearly against 0.6% expected.
Vaccine optimism: The US Food and Drugs Administration released a report confirming the efficacy and safety of Moderna's jabs. The publication serves as the first stage ahead of authorization, which is due toward the end of the week. The US and the UK are already administering the Pfizer/BioNTech inoculation and the European regulator has brought the approval of this vaccine forward to December 21.
Eurozone: Markit's preliminary PMIs for November are due out on Wednesday and will likely reflect an ongoing deterioration in sentiment amid the winter covid wave. Germany enters a strict nationwide lockdown on Wednesday and other countries are also either imposing new limits or considering them ahead of Christmas. EUR/USD is torn between the upbeat market mood and the grim reality on the ground.
WTI Crude Oil is holding onto its gains above $47 amid the upbeat market mood and ahead of inventories data later in the day.
Cryptocurrencies are creeping higher once again, with Bitcoin advancing above $19,000.
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