Week Ahead – The UK election is upon us

The upcoming week is going to be a wild ride for those of us in the UK who are facing the most unpredictable election in modern times, one that will dictate not just the domestic agenda over the next five years but also the Brexit outcome. It’s no small issue.

  • Biggest UK election in decades next week
  • US and China seek deal before 15 December tariffs
  • OPEC+ reaches deal on deeper output cuts

While it may seem we’re already into the holiday season and attention is shifting to office parties and shopping, there is no shortage of talking points next week even outside of the UK.

Trade talks between the US and China will continue to be a hot topic as both sides aim to secure a deal before 15 December tariff deadline. Hong Kong protests have created further divisions between the worlds two largest economies and more are expected over the weekend.

UK Election

We’ve entered the final week of the election campaign and traders are starting to feel a little overconfident. Whether that’s the 10 point margin that the Conservatives hold in the polls that would deliver a majority government or Donald Trump’s visit ending without catastrophe, confidence is creeping in.

If we hadn’t been in this position before, it may be understandable, but this premature confidence has been punished before. Maybe this time they’ve got it right. There’s obviously a risk that they’ll be burned again.

The weekend is always a risky time for UK politics when we’re this close to such an incredibly decisive day. The Prime Ministerial debate on Friday night is the first chance of the weekend for both to take aim at each other.

It could be fierce as the clock ticks down to election day with Johnson’s only aim to come out unscathed. Having already avoided numerous events including being questions by BBC’s Andrew Neil, he may face a number of uncomfortable questions.


The biggest risk to the US stock market remains a progressive President.  Currently polls are suggesting that seems to be very unlikely.  The current focus with US politics remains the impeachment process.  Speaker Nancy Pelosi seems likely to get the ball going in the House, but the Senate firmly remains supportive of the President.  The risks of impeachment getting passed the Senate are slim to none.

Hong Kong

Protests have subsided in Hong Kong this week with the government announcing more spending as the economy is now in a deep recession. A march is planned for Saturday though and although planned to be peaceful, tensions could escalate.

Major risks are limited with the US-China interim trade agreement seemingly in the final strait. Protests turning violent could weigh on the Hang Seng to start the week.


Protests have subsided in Hong Kong this week with the government announcing more spending as the economy is now in a deep recession. A march is planned for Saturday though and although planned to be peaceful, tensions could escalate.


RBI did not cut rates as expected today. Its hand is stayed by an ugly stagflation mix. Growth revised lower from 6 to 5% and inflation revised higher for Q4 2019 and Q1 2020. The non-performing loans issue across the non-bank and official financial sectors appears to be deepening.

The INR is lower and Indian bond yields are higher today. The Sensex has fallen. The sell-off could deepen next week, especially if the US and China fail to agree a trade deal.


The RBA held rates with a dovish outlook. Australia trade surplus fell more than expected led by mineral resource. No visibility on fiscal stimulus by the Federal Government, it appears that most sectors of the Australian economy are now in a recession or slowing.

Any change in the status of trade negotiations would be detrimental to local equities and the Aussie dollar. Any discussion on QE at the RBA meeting could hurt the local dollar.

LATAM Politics

Protests in Latin America have put pressure on most economies, either for the presence of social movements within its borders, or for the threat that one could break out soon.

Risk appetite has been positive this week and for the most part has ignored protest movements in the second part of the week. Trade optimism could soon turn into pessimism and with it the investors could once again look at political instability as a big factor driving risk aversion in the region.



The dollar will remain sensitive to trade updates this week, but also see a strong focus on with key rate decisions.  The greenback has fallen against most of its trading partners and we could see further weakness if we see material weakness to the US economy.  The Fed has done a very good job in signaling they are on hold until any material changes to the outlook.

The Fed is still evaluating what to do regarding the repo market upheaval and we could get an incremental update on the standing repo facility.  While the Fed meeting could be a non-event on Wednesday, we could see the ECB decision see further momentum grow for calls to move away from negative interest rates.

We are one tweet away from a complete collapse in the US-China trade war.  The latest uncertainty on how Hong Kong will impact trade negotiations and whether we will see a meaningful rollback with tariffs will determine how much risk appetite we have for global indexes.  The dollar will remain a key safe-haven trade that could see it outperform to the euro and commodity currencies.

Mexican Peso

The Mexican peso has been on an upwards trajectory since trade hopes lifted risk appetite. The peso has appreciated more than one percent against the dollar even as the NFP returned some of its strength to the greenback, but it was too late to make a difference. Even if the Fed does not cut for a fourth time in December and the Mexican central bank does so in the middle of the month the rate differential still favours the peso.

Contagion risk in Mexico is low given political stability and a government that after a year in power is coming around to the idea of more private investment.

The USMCA ratification is advancing at a slow rate, but it keeps moving forward, with the biggest risk not getting it done this year. A USMCA ratification on an election year would not be impossible, but it would get tougher as it would be heavily politicized to further divide voters.

The currency pair is trading at 19.33 and could break under 19.30, although as the trading session approaches the end investors could try to hedge their dollar positions as much as possible before going into the weekend.

The liquidity of the peso makes it a vehicle for speculators that want to short the region as Colombians took to the streets today to protest labor reforms. The precedent set by Ecuador, Bolivia and Chile will not be lost in the market as political instability will keep downward pressure on LatAm markets.


Oil prices are up more than 15% since early October, buoyed in recent days by efforts by OPEC and its allies – or OPEC+ as they’ve become known – to further rebalance the market after years of oversupply.

Production cuts were increased to 1.7 million barrels per day, from 1.5 million previously, but concerns about its effectiveness and compliance with the cuts are stopping traders getting carried away. Still, price is continuing to grind higher, with Brent and WTI trading at near-three month highs.

The trade war is the big risk for oil prices in the near term. Both the US and China want us to believe a phase one deal is close but this was meant to be signed in Chile a month ago. With 15 December tariff deadline approaching though, a sense of urgency may materialize and a deal could well give oil another kick higher.


The US jobs report on Friday took the wind out of the sails of gold bulls just as they were growing in confidence. The yellow metal has struggled at $1,480 both when trading above this level and below and this time it was no different.

A few days of pressure was obliterated by a stellar US jobs report, after which markets went into risk-on mode and gold headed south. Gold remains in consolidation a little longer, with $1,440-1,450 below now key.

Two central bank meetings next week including the Fed should be the key events for gold but recent easing by both mean policy makers are already in holiday mode. The trade war remains the final thing that could really shake things up for gold.


Bitcoin has entered consolidation mode again between $7,000 and $8,000. This comes after a tough period for the cryptocurrency after Chinese authorities appeared to once again turn their back on them. While they’re fond of the technology, it’s likely they’re not too thrilled with the idea of ceding control. That’s hardly surprising.

Cryptocurrencies and volatility go hand in hand. We may be in a period of consolidation but that’s unlikely to last. The worst of the decline may be over for now but when it comes to bitcoin, no one can really say so with any real confidence.

Key Economic Releases and Events

Sunday, Dec 8th

23:50 Japan High GDP Rev QQ Annualised Q3
China (Mainland) High Trade Balance USD Nov

 Monday, Dec 9th

06:45 Switzerland Medium Unemployment Rate Adj Nov
07:00 Norway Medium GDP Month Oct
08:00 Czech Republic Medium Unemployment Rate Nov
12:00 Mexico Medium Headline Inflation Nov

 Tuesday, Dec 10th

01:30 China (Mainland) High CPI YY Nov
07:00 Norway High Consumer Price Index YY Nov
07:00 Denmark High CPI YY Nov
08:00 Czech Republic High CPI YY Nov
08:00 Hungary Medium CPI YY Nov
09:30 United Kingdom High GDP Est 3M/3M Oct
11:00 South Africa Medium Manuf Production MM Oct
21:30 United States Not Rated API weekly crude stocks 2 Dec, w/e

 Wednesday, Dec 11th

08:00 South Africa High CPI YY Nov
08:30 Sweden High CPI YY Nov
11:00 South Africa Medium Retail Sales YY Oct
13:30 United States Medium CPI YY, NSA Nov
15:30 United States Not Rated EIA Weekly Crude Stocks 6 Dec, w/e
19:00 United States High Fed Funds Target Rate 11 Dec

Thursday, Dec 12th

08:30 Switzerland High SNB Policy Rate Q4
08:30 Sweden Medium Unemployment Rate Nov
09:00 South Africa Medium Mining Production YY Oct
11:00 Turkey High O/N Lending Rate Dec
12:00 India Medium CPI Inflation YY Nov
12:00 India High Industrial Output YY Oct
12:00 Mexico Medium Industrial Output YY Oct
12:45 Euro Zone High ECB Deposit Rate Dec
13:00 Russia High GDP YY Quarterly Revised Q3
13:30 United States High Initial Jobless Claims 7 Dec, w/e
19:00 Argentina Medium CPI 12 Months Nov
21:30 New Zealand Medium Manufacturing PMI Nov
23:50 Japan High Tankan Big Mf Idx Q4

 Friday, Dec 13th

06:30 India High WPI Inflation YY Nov
07:00 Turkey Not Rated Industrial Production Unadj MM Oct
08:30 Hong Kong Not Rated Industrial Production YY Q3
10:30 Russia High Central bank key rate Dec
13:30 United States High Retail Sales MM Nov

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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