Caution into risky weekend

Stock markets easing off a little into the end of the week, with most of Asia posting small losses, while Europe is poised to open marginally lower as well.

I’m not sure if I was overly optimistic, a little naive or just caught up in the festive season earlier this week but it seems negotiators on both sides of the Atlantic have decided they can squeeze out a few more days of talks before shaking hands – metaphorically, maybe under the circumstances – on a deal.

What that means is we could be carrying a hefty amount of event risk into the weekend which may explain some of the moves we’re seeing on the final trading day of the week. While I remain confident that a US stimulus and Brexit deal will be reached, it’s looking like a make or break weekend which should make investors nervous.

Senate Majority Leader, Mitch McConnell earlier this week reportedly prepared lawmakers for a possible vote over the weekend in order to get a deal wrapped up in time for Christmas and, far more importantly, before the cliff-edge at the end of the year. There is a substantial package there that lawmakers on both sides of the aisle are in agreement on so I see no reason why something can’t be passed. The fear is it drags into the period between Christmas and New Year, creating heightened uncertainty into year-end.

The clock is also ticking away across the pond, with the UK poised to withdraw from the EU at the end of the month. The European Parliament has set a drop-dead deadline on Sunday for talks if the two sides wish an agreement to be ratified before the end of the year, when the UK leaves the transition period. The two sides are closing in on a deal, with fishing remaining the final major hurdle, although some work is still needed on a level playing field. After a tortuous four years of talks, best to remain in cautious mode.

For a look at all of today’s economic events, check out our economic calendar.

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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