European open – Trade, Brexit vote, gold, oil

Boris Eyeing a Merry Brexmas (Sorry)

As is to be expected at this time of year, markets have entered into holiday mode with futures eyeing another mixed bag on the open.

Source – Thomson Reuters Eikon

We’re not exactly short of things to discuss. The phase one trade deal between the US and China is, sort of, wrapped up. The final few pieces of tape are still being applied and who knows how long that will take. This deal was done in October, remember. Still, no new tariffs makes for a very merry Christmas for US consumers and Chinese manufacturers.

Boris Johnson got his present early this year in the shape of a Conservative majority government. He’s not done yet though, with MPs due to vote on his withdrawal bill on Friday, with one very special amendment ensuring no extension to the transition period beyond the end of next year. Given the size of his majority, there’ll be no late dashes around Westminster whipping the numbers on this one.

The amendment came as quite a shock to traders, prompting a sharp reversal in the pound which gave up all of its election gains as no deal Brexit fears resurfaced. This doesn’t leave very long to get a deal over the line, unless the government is eyeing an off the rack option, like that which Canada recently negotiated. Sterling is still comfortably above 1.30 though, a break of which would be a real blow to the currency.

Gold shrugs off trade rally

Gold has taken consolidation to the next level over the last few days, with the daily range tightening to less that ten dollars and showing little sign of life. The bump in risk appetite that we’ve seen across asset classes has missed the yellow metal which continues to hold near the upper end of its recent ranges. It’s struggling to hold onto any break above $1,480 though so bulls shouldn’t get too excited just yet.

Gold Daily Chart

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Oil rally gathering momentum

It’s been a strong end to the year for oil producers, with the output agreement and trade deal giving prices a 20% lift from their October lows. Of course, the action taken by central banks over a number of months has played a big role in easing economic fears as well. Brent has pulled a little off yesterday’s highs but continues to trade above $65. The rally doesn’t appear to be lacking any momentum though so a push towards $70 may be on the cards as we head into the new year.

Brent Daily Chart

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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.