Lots of noise, But no chorus

As the week rolls, thankfully, into Friday, the noise level in financial markets continues to be high enough to warrant a visit from the local council but has yet to coalesce into a chorus we can all sing and dance to. The bank and forth of the markets this week have seen a desperate frenzy of searching for news stories to justify the, at times, counterintuitive price moves.

US dollar holds own, pound rallies

The US dollar’s refusal to roll over, and the equity market FOMO gnome’s reluctance to keep buying everything after a dovish FOMC are causing the most confusion. I suspect the answer is simpler than many would wish. The street has been very short US dollars for months now, and long equities need no explanation. The FOMC was not enough to recharge momentum, and we are merely seeing a reduction in extended positioning, leading to noisy, but ranging markets.

Elsewhere the noise continues as well. The clock keeps going TikTok on the Byte Dance/Oracle/WalMart/ Sequoia/ insert US venture-capitalist here TikTok deal. Anyone wishing to predict the final response by President Trump is a braver man than me.

Over in Europe and the United Kingdom, Covid-19’s comeback is still making disturbing gains and may yet have a last 2020 finale for the region. The Brexit ice thawed slightly overnight, with some minuscule progress in trade negotiations made allegedly. Presidential candidate Joe Biden called the UK out on its Internal Markets Bill, saying he wouldn’t ink a US/UK trade deal if the bill undermined the Good Friday Agreement, which it would. Unsurprisingly, the UK Prime Minister backtracked somewhat overnight, and will allow a Parliamentary override. That won’t be enough for the EU or Mr Biden, or some of the UK’s lawmakers in fact. Nevertheless, sterling continued to rally, continuing its quite remarkable one-week comeback. Whether it lasts is another matter.

The US Initial and Continuing Jobless Claims data was inconclusive overnight. It remained stubbornly high but did not deviate too far from the previous weeks, giving no strong signal one way or the other. The cross-party grouping working on a desperately needed fiscal stimulus bill appears to be making progress and has the US president’s ear. No response from the Democrat and Republican congressional leaders though, means this is likely to be a story for late next week or the week after.

The week has been noisy, but lacking substance on the Covid-19 vaccine front as well. Plenty of pharmaceutical/biotech are in Phase-3 trials and all are upbeat. However, not one really wants to put a date on completion or give much concrete insight into the progress of their trials. Again, I suspect this story will be one for the weeks ahead. I remain confident that my reverse Black Swan will be at least, partially successful, and some vaccines that aren’t made in Russia will arrive in Q4. Producing and getting them out to the world will be the challenge. Disturbing, an ever-growing list of countries such as India and Indonesia are basing their entire Covid-19 strategy on just this happening. Let’s hope I’m right and my all-in bet on Black 13 comes up on the roulette table.

With the data calendar strictly second tier regionally and internationally today, I expect yet another noisy tail-chasing, but ultimately range-trading session ahead. Roll on another stay-at-home weekend.

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.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley