European update – Markets slip on US holiday

Late US selling weighs on sentiment

With the US celebrating the Thanksgiving bank holiday on Thursday, markets should be a lot quieter heading into the weekend even with much of the news flow coming from Europe.

The market bounce didn’t last too long, with some late selling in the US session possibly worrying investors and weigh on sentiment today. It’s never encouraging when investors lock in profits heading into the close before a bank holiday or weekend, particularly on the back of a period of weakness in the markets and when confidence is already shaky at best.

Naturally, the bank holiday in the US leaves us with barely any market events of note for the rest of the day, with eurozone consumer confidence and a speech from BoE policy maker Michael Saunders the only notable items. Even these are unlikely to have much, if any, impact on the markets which means focus will be entirely on the political landscape with Europe providing plenty of drama to compensate for the lack of activity.

DAX dips as volatility continues in stock markets

UK and EU strike agreement on future relationship

Brussels has been at the centre of the drama again this week, with Theresa May visiting on Wednesday but failing to finalise the terms of the future relationship ahead of the EU summit on Sunday. Reports this morning though claim these details have been cleared up and a draft text on future ties has been agreed which has pushed sterling up close to 1% against the dollar.

GBPUSD Daily Chart

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Unfortunately for May, this is the easy bit, now she must sell the exit agreement to her own parliament. Given the level of criticism her deal has received from across the board – be it leavers, remainers, Conservatives, their DUP partners, Labour, the SNP – this is no easy task, with the only thing going for it being that it is better than the only other currently viable alternative, no deal.

Italy under pressure after EC rejects budget proposal

Italy remains a cause for concern despite its markets doing ok yesterday in the aftermath of the European Commission rejecting its budget and pursuing an excessive deficit procedure which could lead to sanctions. There may have been a “buy the rumour, sell the fact” element to yesterday’s trade given how expected the outcome was, but today they are coming under some pressure again as the government continues to show defiance in the face of sanctions and market pressure.

Currencies mixed ahead of Thanksgiving holiday

Oil under pressure after another inventory build

Oil is trading more than 1% lower again today, failing to build on yesterday’s bounce on the back of another inventory build being reported by EIA. With oil now trading around 30% below its highs, momentum does appear to be easing for now which may provide some support for WTI and Brent. The pair may find some support now around $50 and $62, respectively, with the OPEC+ meeting only a couple of weeks away which could have significant near-term implications for the price.

Oil (WTI and Brent) Daily Chart

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.