US Open – A disappointing week

A week that hasn’t lived up to expectations

This week hasn’t quite lived up to expectations and investors are getting a little nervous as we head into the final few months of the year.

The Fed is highly accommodative but not accommodative enough, Congress is desperate to agree a much needed relief package but no closer to doing so and virus numbers globally are rising, rapidly. What’s more, tech stocks – which were a driving force behind the outstanding stock market comeback – remain shaky and vulnerable to more downside.

While the end of the year could look very different – a Covid vaccine, political clarity and fiscal support – the next few weeks could be challenging. Congress is running out of time and an awful lot of compromise is required to get anything over the line. In the absence of a deal, it’s not hard to envisage a continuation of the tech-led correction in the markets.

UK heading for more restrictions as consumer continues to drive economic recovery

What’s more, we’ve long anticipated a tough winter as far as Covid is concerned but the spike has arrived early and restrictions are already being put in place which will weigh heavily on the economic recovery, just as policy makers were starting to feel a little upbeat about the pace of the rebound.

Here in the UK, regional restrictions are already being imposed in the hope that a repeat of the nationwide lockdown can be avoided but already there’s reports that a brief two week repeat is under consideration next month. It could be a bleak winter for business and the icing on the cake could be no-deal Brexit. Once again, compromise is required in these difficult times.

UK retail sales remained strong in August, up 0.8% compared to July and 4% since February. In an economy like the UK, consumer spending is hugely important and so these numbers are clearly a source of encouragement. Of course, that’s until you remember that the furlough scheme comes to an end in October, at which point the picture may change dramatically as unemployment soars. It may be time for another government u-turn to help the economic recovery navigate through the hard winter.

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Craig Erlam

Craig Erlam

Former 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.