A Calm End to the Trading Week Expected

Written by: Craig Erlam | OANDA Europe

A quiet end to the week, as is to be expected given the US Thanksgiving bank holiday.

While traders in the US will rejoin today, probably in much smaller numbers as many make the most of the extended weekend, I don't expect things to pick up in any meaningful way. The economic calendar is still extremely thin and the way these markets are positioned, I think many are already in weekend mode.

AstraZeneca has sought to ease concerns about its vaccine, as its share price continues to drop due to questions around the efficacy of it. The company confirmed that further trials will continue but that shouldn't hold up approval of the vaccine before the end of the year in the UK and European Union, although it may do so in the US. 

Brexit talks are continuing, with Michel Barnier returning to London tomorrow after self-isolating as a result of being potentially exposed. The talks have stalled despite being carried out virtually and work will resume in order to get a deal over the line and ready to be approved before the end of the year.

Markets are very relaxed still about the prospects of a deal, with the pound remaining near two and a half year highs against the dollar, although the FTSE is a little lower today and underperforming its peers in Europe. While the final disputes are becoming a little more public again, I remain convinced that a deal will be reached at the eleventh hour, whenever that is.

Oil steadies as OPEC+ prepares to get discussions underway

Oil prices are sitting a little off their highs on Friday following another impressive week that saw them hit their highest levels since March. With OPEC+ due to meet next week, traders may now take a more cautious approach as they await the groups decision on whether to perservere with planned increases in January, or delay them in light of the restrictions we're once again seeing in response to the severe winter spread of Covid-19.

The decision may have been straightforward prior to the vaccine news. Crude was trading back around $35 and the trend wasn't favourable. But that has all changed now. Will producers be tempted to push ahead as planned and hope that the vaccine buffer will keep prices stable above $40? 

Some members will hold online talks over the weekend ahead of next weeks meeting which could lay the foundations for how the discussions proceed. Obviously, producers don't want a repeat of earlier this year when an oil price war compounded the issue of the pandemic and caused a historic plunge in prices. All of this will become clearer but for now, we may just see a little consolidation, maybe even profit taking, around these highs.

Gold struggle goes on

Gold is really struggling to pick itself up and dust itself off after taking quite a beating in recent weeks. The yellow metal has been among the biggest losers of the vaccine news, crashing below $1,850 earlier this week, where it has found strong support for the majority of the summer. 

It's now wallowing in self-pity around $1,800 and while the timing of the Thanksgiving bank holiday may have been kind to it, gold looks vulnerable to another tumble. Despite falling more than 8% in just under three weeks, the path of least resistance still looks to be below. I know an 8% drop would just be a normal move in something like bitcoin but in a stable investment like gold, it's a fairly significant drop.

Bitcoin tumble small compared to the last month's gains

Speaking of bitcoin, it's down around 2% at the time of writing. No doubt that will have changed by the time I hit send but what can I do. The cryptocurrency fell a little under 10% yesterday, a move that doesn't even trigger the batting of an eyelid when you're talking about bitcoin or any of its peers, for that matter. It's shedding another couple of percent today but all of this pale's to insignificance compared with the more than 60% rally since the Paypal announcement last month. 

This instrument remains as volatile and highly speculative as ever. Not that this will in any way act as a deterrent. People know what they're getting themselves in for when it comes to cryptocurrencies. They thrive on hype and and when they eventually fall, they do it in spectacular fashion. There may be more reasons to be bullish on cryptos than there were three years ago but some things simply haven't changed. The wild ride continues.

Related: Markets in Holiday Mode