Talking Points:
•This past week closed out with a holiday curb on volatility as markets passed through Thanksgiving
•Oil was a standout market performer with a tumble associated to news that spurred fears for OPEC agreement next week
• Top event risk in the coming week includes: NFPs, BoE financial stability report, Italy referendum and more
See what live coverage is scheduled to cover key event risk for the FX and capital markets on the DailyFX Webinar Calendar.
This week closed out as was expected through the holiday trading fog: quietly. Yet, the threat of volatility transitioning into the historically restrained December remains oppressively high. Through the end of this past week, we had seen a number of impressive trends arise; but the most prominent were centered on the US Dollar and US equities. The former backed off its climb amid the liquidity retrenchment. In contrast, the S&P 500 extended its remarkable advance beyond the comparatively cool view of risk trends in other countries around the world. Both are results of quiet market conditions. The stand out for volatility through the final 24 hours of this past week was oil. Crude prices experienced another shock (this time bearish) as speculation turned forward to next week's OPEC meeting on news member Saudi Arabia was throwing the supply curb agreement in doubt.
Oil isn't the only asset that is facing high degree event risk and an active speculative backdrop. The landscape is proving tumultuous for the entire global financial system. Sparks are met with volatility and traders remain tensely on edge. That isn't a good position to be with US equities at record highs that are conspicuously divergent from global counterparts and the Dollar struggling at 13-year highs as its fundamental driver (Fed rate forecasts) is almost fully priced in. We are seeing conditions heading into December that more resemble the extreme 2015-2016 volatility rather than the historical average that sets out the final calendar month as a steady rise in speculative exposure with retreating volatility.
Event risk in the coming week is remarkably dense with high probability volatility drivers. From the US, we will see the ongoing uncertainty over US trade policy with the new income president share screen time with FOMC rate forecasts. The November NFPs, PCE (Fed favored inflation figure) and a host of Fed speeches are scheduled. Keeping the temperature on Brexit turned up, key data will give an economic view, the BoE's Financial Stability Report a market view and an expected JMC meeting the political perspective. The laundry list is long and the flash points are many. We discuss the most significant ones and the opportunities surrounding the catalysts in this weekend Trading Video.
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