The return of lockdowns

Europe has turned red on Friday as a new lockdown in Austria and the prospect of similar action in Germany wiped out earlier gains and forced stock markets down close to 1%.

The euro is also falling at the end of the week following the announcement that Austria will begin a 20-day full Covid-19 lockdown from Monday in response to surging case numbers which have far surpassed last year’s peak. While fatalities remain well below the peak, they are accelerating and the government is clearly keen to arrest it before the situation potentially becomes much worse.

With Germany seeing a similar trend, the question now becomes whether the region’s largest economy will follow the same path. Its Health Minister, Jens Spahn, today suggested nothing can be ruled out and that they are in a national emergency.

The situation is not quite so severe in other countries like France, Italy and Spain but that could change in the coming weeks, as we saw around the same time last year. High vaccination rates mean the link between case numbers and fatalities is far lower but the former is rising at a remarkable rate which is clearly making it very hard to ignore.

UK retail sales nothing to get excited about

There was a positive surprise in the UK retail sales report for October, as volumes rose 0.8%, driven by a 4.2% jump in non-food store purchases. While I would like to believe that we’re seeing the return of the UK consumer after five consecutive months of falling sales, it’s hard to put this down to anything other than early Christmas shopping, with sales being lifted by big increases in areas such as clothing and toy retailers.

The prospect of festive shortages is on everyone’s mind and it’s inevitable that many will therefore look to get ahead rather than risk empty shelves and disappointed children next month. I imagine we’ll see this reflected in the November and December numbers.

That’s not to say we can’t see the return of the consumer which would be huge for an economy so dependent on them. But they have been very cautious for most of the year, as evidenced by the weak consumer sentiment data and higher than average savings rate. And with inflation rising, certain pandemic benefits ending and taxes rising next year, I struggle to see those attitudes suddenly improving. It seems traders agree as the pound edged higher before giving most back shortly after.

Bitcoin dips will continue to attract interest

Bitcoin continued to slide on Thursday, falling below USD 58,000 where it saw strong support in late October. We may have just entered into a deeper correction, not that this will panic anyone. I’m sure there’s plenty of bitcoin speculators rubbing their hands together at the prospect of catching some dips, such is the confidence out there in the space at the minute. How far it will fall is anyone’s guess. A move back towards USD 50,000 would be interesting and, given its gains since the summer, no big deal. The dips will continue to attract plenty of interest.

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

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Former Craig

Former Craig

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.