Dollar at Two Year Lows

STOCK INDECIES  FUTURES

Global equity markets overnight were generally higher with markets in Tokyo, Moscow, Frankfurt, and Sydney trading less than 1% lower. The major headline of the last 12 hours is the delay of a Senate vote on the upsized US stimulus package. Earnings reports today include Carnival Corporation, Stein Mart, global Eagle entertainment Inc. and SINA Corp.

S&P 500: Obviously, there is some disappointment from the failure to get the larger direct payments to US citizens, but it should not be forgotten that $600 payments are in the process of being distributed. We reiterate the S&P maintains a very minimal net spec and fund long position and it is possible that preholiday optimism will leave the bull camp with an edge today.

CURRENCY FUTURES

DOLLAR: This morning the dollar sits right on two-year lows and appears to be in a slow erosive decline. Apparently, the beginning of distribution of $600 direct payments from the smaller stimulus package agreement is providing macroeconomic optimism. We also suspect that the approval of a UK vaccine and claims that the company could manufacture 3 billion doses next year is adding to the safe-haven liquidation of the dollar. Given the negative sentiment toward the dollar a softer than expected Chicago purchasing managers index is unlikely to produce a sustained wave of safe-haven buying in the dollar.

EURO: The uptrend in the euro has been extended again this morning with another higher high for the move and what appears to be another higher low session. While not a direct impact on the euro seeing very strong Swiss survey of expectations readings for December adds to the hope for global recovery and in turn builds interest in “recovery currencies” like the euro.

YEN: With a range up 7 day high in the Yen this morning it would appear as if the June through mid-December uptrend has resumed. While some will suggest that virus news and the failure to get a larger US stimulus deal provides some flight to quality buying of the Yen, we suggest the Yen is joining the ranks of “recovery currencies” looking beyond the tail end of the pandemic.

SWISS: As indicated already the Swiss should benefit from a very impressive gain in a ZEW expectations survey for December especially given another higher high for the move overnight and the appearance of a resumption of the long-term uptrend on the longer-term charts.

POUND: The charts have shifted positive this morning and the bull camp should be given added confidence by the biggest jump in UK house prices in 6 years! As in other non-dollar currencies, the Pound appears to be poised to rally in conjunction with other recovery currencies.

CANADIAN DOLLAR: With signs that the Dollar is poised to fall to even lower levels ahead, notice of new stringent Canadian virus containment measures and favorable charts, the path of least resistance in the Canadian is pointing up.

INTEREST RATE MARKET FUTURES

The charts in the treasury markets this morning favor the bear camp to start, with March bonds extending this week’s pattern of lower highs and prices sitting just above a downside breakout point of 171-27. While the larger $2,000 checks will not be seen due to a delay in a Senate vote on the larger stimulus package, the government is already in the process of ramping up direct deposits of $600 from the smaller stimulus deal. In looking back to yesterday’s US scheduled data flows it should be noted that the Case-Shiller home price index posted the highest reading since August 26th of 2014 and for some that is a sign of the beginning of an inflationary cycle. Other minor issues pressuring treasury prices early today include generally positive global equity market action, news that the PBOC performed a cash injection overnight and the approval of yet another vaccine from the UK. In the early action today, it is likely that Chicago purchasing managers will increase the credibility of a pre-existing consolidation low support level at 171-16 in March bonds. The North American session will start out with a weekly private survey of mortgage applications, followed by the November goods trade balance which is expected to have a modest increase from October’s $80.4 billion monthly deficit. November wholesale inventories are forecast to have a modest downtick from October’s 1.1% reading. The December Chicago PMI is expected to have a modest downtick from November’s 58.2 reading. November pending home sales are forecast to have a moderate uptick from October’s -1.1% reading.