US Open – Deal making time

Crunch talks in Washington and London

Stimulus optimism comes and goes in these markets and it seems to be making a comeback again on Tuesday as Pelosi and Mnuchin work to overcome their differences.

Mnuchin being in the Middle East isn’t ideal but it’s obviously not a deal breaker. Most of us have lived on video conferencing for the last seven months and barring the occasional network issue or interuption, it does the job. If anything is going to torpedo these negotiations, it’s not this. It may not even be Mnuchin or Pelosi, getting the Senate on board may be the biggest obstacle to overcome.

In fact, Pelosi and Mnuchin appear to be making some positive moves. The White House has already increased its offer and Trump has indicated he’d be willing to go further as the election moves into the final stretch. One of Pelosi’s aids suggested they’re continuing to narrow their differences, which seems to have got investors excited. Given the objections in the Senate, this may still be a little premature.

Sterling facing boy who cried wold moment?

The game of Brexit chicken is becoming ever more intense, with the UK refusing to restart talks until the EU offers more concessions. A bold tactic from the country with the most to lose from a deal failing to be reached but this is how tough negotiations go, perhaps just typically in a less public manner. It’s pointless judging officials now, the outcome is all that matters.

I remain confident that a deal will be reached that averts a no-deal as it’s simply inconceivable to me that either side would choose the alternative in the midst of a pandemic, let alone at the best of times. Sterling is still quite comfortable with the way things are unfolding which suggests my confidence is still shared by the markets.

Naturally that creates massive downside risk with only a relief rally to look forward to in the event of a positive outcome but we’ve had four years of noise, there had to be a point when traders became a little numb to it. Could be another 23 June 2016 moment for the pound if this turns out to be a boy who cried wolf moment for negotiators.

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 BNN. 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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