Brexit deadline week

GURU WISDOM

“Investing is the intersection of economics and psychology.” – Seth Klarman
 

MARKETS

Last week proved to be a huge milestone for global stock markets with a sudden return of economic optimism thanks to the news of an effective vaccine from Pfizer / BioNTech. The Dow Jones index (see our chart of WS30) hit a record high – as did the Russell 2000 a broader index of medium sized US businesses. The gains were matched in Europe with the DAX, CAC and FTSE 100 all at their highest levels since the crash in March.

The US dollar gained on the week, contrary to a risk on mood in markets. DXY rose 0.57%, in a partial recovery of the big 1.92% drop the week prior. GBP/USD was up for the week but was pulled off its highs ahead of a big week for Brexit.

It was a rough week for precious metals, which fell by the most since the big drop in early August. On Monday the price of gold dived over $100 in one day but since then it has held onto critical support at $1860 per oz. 

Oil prices broke higher with demand expectations rising on the better economic outlook due to the vaccine news. However, the IEA poured cold water on that brighter demand outlook saying that a covid vaccine was ‘unlikely to ride to the rescue’ of oil demand.

It was another big week for the price of Bitcoin, which reached over $16,000 however the price momentum was a little weaker in other cryptocurrencies. For example Ethereum is yet to take out its September high.
 

Brexit deadline

Mid-November i.e. this week was the extended deadline to reach a Brexit deal after the European Summit last month. In theory, there really must be a breakthrough this week because otherwise there will not be enough time to implement an agreement before the end of the transition period on December 31. An agreement this week could finally see GBP/USD break above 1.35 resistance. No agreement could see another drop below 1.30 but any declines could be limited by the idea that there is still theoretically time right up until December 31.