US Open – Trade Optimism, UK Election Expectations, Oil, Gold, Bitcoin

US stocks are rising for a second consecutive day as investor optimism grows for President Trump to abandon his December 15th tariff threat.  This tariff would end up punishing the US consumer and Trump wants to see a strong stock market with a happy consumer as we near the 2020 election.  Safe-havens fell alongside Treasuries, but the moves are limited this morning.

GBP

The British pound is rising on expectations UK PM Johnson will win a majority, making the path to an orderly Brexit more likely.  The opinion polls got the UK election in 2016 wrong and a certain amount of nervousness persists.   Momentum indicators could see continued optimism for Johnson help the pound rally towards the 1.35 region.

Oil

Oil prices are hanging onto this week’s gains ahead of the OPEC + meetings as the Saudis seem both set to update their pledge of cuts to better reflect their over-compliance and to make sure Russians and Iraqis hold up their end of promised cuts. The Saudis are trying to play hardball with the Russians and their threat to return oil production back to their Saudi quota of 10.3 million bpd or higher is mostly just tough talk.

The talk of a deeper 400K bpd production cut however is likely as the Saudis already voluntarily overcomply by roughly that amount.  The base case is for the OPEC + alliance production to get extended at least six months or possibly to end of next year.

Oil prices should be supported following the meeting if the Russians and Iraqis agree to hold up their end of the deal.  Energy markets might not completely breakout higher without some assurance that the non-compliant producing countries will finally hold up their end of the deal.

Gold

Gold prices are little changed in what has been a quiet day on both the trade front and economic data.  Trade uncertainty and global economic weakness will keep gold prices supported in the short-term.  Recession concerns remain for Germany after a factory report showed orders unexpectedly dropped.  Optimism was brewing for the Europe’s largest economy and we could see continued German economic data weakness support calls for some fiscal stimulus.  If the US does not see a rebound in factory orders later this morning, we could see gold attempt to retest yesterday’s high of just below $1,490.

Bitcoin

Bitcoin seems to be finding some technical support from the $7,100 level.  Today’s slight rise is just the calm before the next major move.  Macro traders have little reason to be bullish right now, but it seems we could be in for a short-covering move.

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