Traders and investors face a busy week as Europe and the US face important negotiations and significant data releases. The European Union and the United Kingdom will continue talks on a trade deal ahead of the EU summit that begins on Thursday. The two major US political parties are still moving toward a new round of fiscal stimulus amid the election campaigns, all occurring against a backdrop of global inflation, trade and employment data reads.
Although the UK’s transition period doesn’t end until 31 January next year, Prime Minister Johnson has imposed a deadline of this week’s summit. The UK as already floated a barebones structure of simply operating under WTO rules, and the complexity of negotiating with the 27 nation bloc could make this the most likely result. Support for both the British pound and UK stocks over recent weeks suggest markets are comfortable with this position, and any agreement could add to the positive momentum.
US markets continued their growth positive moves on Friday night, with further gains for stocks and ongoing pressure on bonds and the US dollar. Negotiations between Democrats and Republicans over the shape and size of a new fiscal stimulus package are capturing headlines, but markets have moved on, pricing a $1.9 trillion compromise. A number of analysts have recently opined a Biden win is a positive for markets, extending the idea that there is no development that could derail the US “buy the dip” mentality.
Early Asia Pacific trading indicates position trimming ahead of the event risk, with the US dollar firming and futures pointing to a soft start for shares. The Yuan is trading lower after the People’s Bank of China removed some restrictions on shorting the currency.