US Open – A Summer Lull For Stock Markets

Slow Start to the Week

Stock markets appear to have remained in something of a holding pattern early this week, as we navigate through a relatively quiet period in the markets.

It may not have been your typical summer so far but the seasonal lull has been apparent and with lawmakers in the US now on recess – dashing any hope of a near-term solution to the pandemic relief package – we may have to endure this a little longer.

The economic calendar is a little bare, particularly in the early part of the week, and even the events we’d typically look towards may not carry the weight you’d typically expect. The Fed minutes on Wednesday may be of interest, especially considering the fluctuations we’re seeing in Treasury yields at the minute, but I’m not entirely sure what we could see that will make a huge difference.

This may just be the calm before the storm, with the final months of the year being potentially huge. The next few months could potentially deliver a multi-trillion relief deal, a fierce and highly unusual Presidential election and a Covid vaccine. It could be massive for markets.

Gold back above $2,000 as USD tests major support

The action right now is consigned to the fx, treasury and precious metal markets, with last week’s spike in yields sending gold and silver spiralling and lifting the greenback off its lows. Yields are settling down again but the action is far from over, with the dollar index now testing major support at 92.50 and gold setting its sights on new record highs having once again overcome $2,000.

As long as real yields continue to fall, witth the data in the coming months likely to take a hit from the re-imposition of restrictions across various US states, there could be plenty of action in the coming weeks.

Oil remains near range-highs

It’s been rather more relaxed in the oil space, with the weaker dollar helping to sustain crude near its range highs. As was to be expected, the recovery has had its setbacks which has reigned in expectations for growth and oil demand, as recognised by IEA last week. Oil producers are slowly increasing production once again from this month and the group will get the latest assessment of the JMMC tomorrow which will enable it to navigate further tapering of the historic cuts agreed earlier in the crisis.

Compliance with the previous cuts has been high though which will reinforce confidence in any future action that may be necessary but for now, the best thing for the group may be to just hold fire as further setbacks in the coming months are inevitable, again.


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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.