The first week of December is behind us, and we can literally say that it was a one-way street from a trader’s perspective, as the U.S. dollar fell across the board. Also, one of the three main events of the month already passed – the NFP report.
Having said that, the focus this week turns to the European Central Bank (ECB) on Thursday. One day earlier, on Wednesday, the Bank of Canada (BOC) will also announce its monetary policy decision, so the price action this week should be interesting, especially on the EUR and CAD pairs.
Dovish ECB Statement Expected Thursday
The ECB decision might already be priced in, as the central bank was not shy in expressing its point of view. The market expects no rate cuts but an extension of the quantitative easing program and more favorable terms, TLTROs (Targeted Long Term Refinancing Operations).
The only problem that the ECB has at this point is that despite its dovish stance, the Euro is stronger across the board. Moreover, this time is not only about the EURUSD, but all Euro pairs have traded with a bullish tone recently. The EURUSD, in particular, has reached close to 1.22 last Friday ahead of the NFP report.
Brexit Still Affects the GBP Price Action
Brexit is still a theme for financial markets. Negotiations are still ongoing, and this week is crucial in seeing if the U.K. will go ahead and break international law. Should it choose to do so, the risk is that all the efforts spent so far in negotiating a deal are in vain.
U.S. Stocks Remain at the Highs
Last Friday’s NFP report disappointed, in the sense that it revealed a weak labor market in the United States, one that still has a long way to go to recover the lost ground. Nevertheless, the weak report did not stop the stop market from making new all-time highs. Dow Jones, in particular, traded and closed well above the 30,000 level, on the back of a weak U.S. dollar.
Global stocks reached last week $100 trillion; the highest level ever recorded. It is at least ironic that it does so during a pandemic, but it shows the difficulty investors have in placing their capital in a world of negative interest rates and depressed yields.