US Close – Brexit deal breakthrough, Europe rallies, Oil higher on bullish EIA report and softer dollar, Gold gains

US stocks rose and Treasuries plummeted on optimism that Brexit negotiators have reached an outline of a trade deal and after the CDC reported that more than 1 million in the US have gotten their COVID-19 vaccines.  It seems very unlikely that the potential Brexit trade deal will fall apart, but uncertainty remains on how soon it will be signed, sealed, and delivered. The biggest cloud of uncertainty now falls back on the US coronavirus stimulus package.  Investors seem mostly confident President Trump’s last-second demand won’t completely derail stimulus efforts, but possibly end of helping deliver extra stimulus to Americans.  It would be political suicide for Republicans not to get something finalized before December 28^th.   

EU/UK

The framework for a Brexit trade deal gave investors the greenlight to start buying everything in Europe.  The devil will be in the details of the Brexit trade deal and until clarity is known for businesses, you might see UK equities have limited gains.  Short-term risks remain for the European outlook and that might not get alleviated until the current wave of the virus gets under control or vaccine rollouts are proven to be successful. 

Currency traders were quick to jump on the British pound and sent it 1% higher against the dollar on hopes that Brexit negotiators were close to a deal.  The announcement of an outline of the trade deal saw many traders close out and call it quits for the week.   Holiday trading conditions will make for some exaggerated swings and lockdowns will take some of the wind out of the sails of the historic Brexit trade deal. 

Oil

Crude prices got a strong boost from a bullish EIA oil inventory report, optimism that the COVID vaccine rollout is going well, and from a weaker dollar that came after Brexit negotiators made an outline for a historic trade accord.  Energy traders are primarily reacting to dollar weakness and news that the US has already vaccinated over one million Americans. 

Gold

Gold prices are benefitting from a Brexit trade deal breakthrough that paved the way for a weaker dollar and as investors appear to be decelerating their Gold ETF sales.  Gold could see further gains if Congress and President Trump are able to quickly resolve the stimulus impasse.

Investors also have their eyes on the January 5^th Georgia Senate runoff races which are no longer on a foregone conclusion to go in favor for Republicans.  A blue wave could still happen and that would do wonders for gold’s stimulus trade.