The ECB has lost the battle of printing presses
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Market Watch review. 04.12.2020

In today's release, we’ll cover the following topics:

  • Rise of the euro to a maximum in two and a half years.
  • Results of the meeting of OPEC members.
  • Budget disputes in the USA. 

The euro is again rapidly rising in price in forex and renews highs in two and a half years, despite the efforts of the European Central Bank. 

On Thursday, December 3, the exchange rate of the European currency against the dollar reached 1.2174 dollars per euro, adding 0.6% for the day, 1.9% since the beginning of the week and almost 15% relative to the "bottom" shown during the collapse of markets in March.

But although the euro broke the Central Bank's conditional "pain threshold" at $1.2 per euro, the market doubts that the ECB has "gunpowder left" to stop the rate rally. There is growing confidence that further QE will not be able to stop the currency strengthening, and the Central Bank has exhausted all possible tools.

Europe is losing the devaluation race, which could further worsen the economy, which the IMF predicts will collapse by 8.3% this year.

After painful negotiations, which almost ended in a quarrel, they nevertheless decided on actions on the oil market in 2021.

Starting in January, the OPEC+ alliance will increase production by 500,000 barrels per day, and then will review the volume on a monthly basis - this decision was made by the Ministers of two dozen oil countries led by Saudi Arabia and the Russian Federation. The quotas of each participant in the transaction will remain the same.

The negotiating scenario began to roll towards deja vu in March, when Moscow refused to give in to the Saudis, who offered to cut production due to the first wave of Covid.

It was not possible to bring the positions closer together for three days: the final negotiations originally scheduled for December 1 were postponed twice, and when they did start, they almost turned into a scandal. Saudi energy Minister Prince Abdulaliz bin Salman refused to host the conference, leaving Novak - the second co-chair - alone.

Brent crude rose 24% in November and is on the verge of $50 per barrel. OPEC+ "does not want to see prices much higher than the current ones", because it "is afraid that the market will not survive the return of shale now".

In the first half of the week, market participants reacted positively to statements from a bipartisan group of senators who proposed approving a $908 billion compromise package for the economy by the end of the year, while the Democrats generally demand more and Republicans less. 

However, Senate majority leader Mitch McConnell did not support this initiative, calling for approval of a smaller package, which the President is also leaning towards. However, congressional democratic leaders Nancy Pelosi and Senate Democratic leader Chuck Schumer called on McConnell to start negotiations immediately. 

At the same time, сongressmen need to adopt a budget of $1.4 trillion by December 11, in order to avoid another shutdown, which, in the context of COVID-19, will unjustifiably exacerbate existing problems.

Closely monitor the news background and be prepared for all the surprises of the market.
 

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