The US dollar weakness prevails at the end of the month even though equities fell in Asia and crude oil benchmarks tumbled. Trade wars make a comeback and markets are also focused on the Brexit talks and an OPEC+ meeting.
The EUR/USD pair is very close to the upper limit of a 1.16-1.20 range. Given a mild risk off, the Swiss franc outperforms. An OPEC+ ministerial panel was once again unable to find common ground over shelving output hike as a consequence, the Brent oil tumbles towards 47.00 USD/bbl and trades almost 2 USD lower than in last week's highs. The official meeting takes place today, so a hit to underperforming oil currencies may very well prove to be temporary.
Old topics return
Old topics, which soon are to be forgotten as we head into 2021, continue to dominate the headlines. US-China tensions are on the rise once again as Trump's administration works on a list of 89 companies, which are suspected of having military ties. The list includes representatives of numerous sectors, for example, oil extraction and semiconductor companies, and therefore causes risk aversion.
Brexit talks continue as well, and the UK foreign secretary hopes a deal could be finished this week, which would be more than enough to meet the 10-11 December EU Summit deadline for ratifying the deal and escape a chaotic exit from the EU's free market. British press strikes an optimistic tone and The Times reported growing pressure on Chief Negotiator Barnier to close the deal and conciliatory gestures from Ursula von der Leyen. The Telegraph assumes the fishery remains the last bone of contention and believes the European Union is likely to recognise British sovereignty over UK waters. Although the talks drag on, a deal remains a central scenario. In such a case, the sterling is set to perform a relief rally and jump significantly on the news. The initial positive reaction would most likely be prone to be faded due to weak economic fundamentals and monetary policy prospects.
Conotoxia research team