It was the week of deals. First it was the Brexit deal that was ‘nearly there’. Then it was the US stimulus bill that was ‘close’ to being finished. There is an obvious rush to get these two hurdles out of the way before year end, but at the time of writing neither deal is agreed. The most anticipated event of the week was the Federal Reserve’s final rate statement of the year. Market participants were widely expecting a dovish shift from the Fed. The Federal Reserve were not as explicitly dovish as they could have been, but nevertheless they said that reducing bond purchases is some way off and the Fed would continue to provide powerful support.

Other key events from the past week

  • EUR: Flash PMI’s, December 16. Improved flash PMI’s boosted the EURUSD on Wednesday. However, with German and the Netherlands starting harsher lockdowns this week will the euro relief only be temporary?
  • GBP: Brexit headlines, December 09. The GBP was once again pushed and pulled all week on Brexit headlines. The main risk still remains a no deal Brexit. Expect heavy selling in the GBP as investors have been buying the GBP since June expecting a deal.
  • USD: Interest rate decision, December 16. Rates were kept unchanged as expected and the Fed said that it will continue bond buys ‘until substantial further progress has been made toward the Committee’s maximum employment and price stability goals’.

Key events for the coming week

  • GBP: Brexit headlines, December 21. The GBP will remain vulnerable next week to Brexit headlines. As investment desks take a break, watch out for possible volatility in the event of a no-deal Brexit between now and year end.
  • Gold: ETF selling slows, December 22. Recent falls in XAUUSD have been enhanced by ETF outflows. The selling slowed last week. Could this be the turning point for gold ahead of strong demand for the Chinese Lunar New Year?
  • S&P500: Santa rally ahead? December 21. Over the last 70 years the S&P500 has gained between December 21 and Jan 01. It has risen in 47 years out of those 70 years. The largest gain was 6.90%. Will the seasonal pattern repeat this year?