GOLD-The countdown clock is running down quickly with both Brexit and the US election

The countdown clock is running down quickly with both Brexit and the US election getting ever closer to an end (at least for US elections). Despite this, we are not yet seeing risk aversion on the markets with stocks continuing the rebound started on Friday. Bullion has also started the new week in green with the spot price again approaching $1,910. A clear climb above $1,925-$1,930 would open space for further rallies, while the scenario remains mostly unchanged so far with the long-term bullish trend untouched, while in the short term we are living a lateral phase in the big trading range $1,850 and $2,070. As mentioned, we have some intermediate levels, at $1,930 and $1,970 (resistances) and $1,885 and $1,872 (supports).

FOREX-The pound is on the front foot in relation to the other major currencies

The pound is on the front foot in relation to the other major currencies at the start of the trading week. Sterling gains versus the euro and the dollar are particularly significant as it shows the markets are dismissing the British government’s rhetoric that negotiations with the EU are over and the future trade relationship will be based on WTO terms as a bluff. If investors’ stance in relation to sterling is anything to go by, then negotiations are far from over and the chances of a deal between the two parts being reached are reasonably high.

EUROPEAN SHARES-Investors are still digesting the latest set of Covid-19 restrictions

An optimistic wind blew over European assets shortly after the opening bell on Friday morning, with almost all benchmarks climbing higher. Today’s risk appetite for European stocks has been boosted after investors welcomed positive developments on the corporate front. Optimism is particularly prominent in the automotive and engineering sectors after both Volvo and Thyssenkrupp reassured investors with their past performances and short-term outlooks. However, traders are still likely to face a “not-so-easy” trading session today as many uncertain market drivers remain. Investors are still digesting the latest set of Covid-19 restrictions in France and the UK with lingering concerns they may severely impact an already fragile recovery. Furthermore, volatility is likely to be on the rise today for UK shares, not only because of the expiry of options, but also because of Boris Johnson’s potential decision to walk away from the Brexit negotiation table with the EU.

GOLD-remaining steady just above $1,900

After yesterday’s sell off on European stock markets, gold is remaining steady just above $1,900. Rising figures of Covid-19 infections are increasing fears of more lockdowns with all the related consequences. In other words, the impending need for more monetary stimulus to mitigate the impact of the coronavirus-induced crisis is keeping investors’ gold appetite at its peak. That said, we should be cautious as at some point central banks will start to be more resistant in adding new stimulus, but this scenario is far from imminent.

From a technical point of view, gold still appears in a positive mode but for further rallies we would need to see a clear breakup of the $1,920-$1,930 level. A fall below $1,880 and later on below $1,860 would denote weakness.

FOREX-Brexit markets don’t expect a no deal scenario

The pound is paring gains versus the dollar and the euro during early Friday trading following a statement issued by EU leaders last night warning that a post-Brexit deal will be very unlikely unless the UK adopts a more flexible stance. With the ball now in the British court a reaction is expected from Boris Johnson’s government. Whatever happens over the next few weeks, it seems that markets don’t expect a no deal scenario, with the pound remaining very close to $1.30. The brinkmanship adopted by both parts is seen as tactical manoeuvring rather than an unwillingness to negotiate. Still, a bumpy ride is expected for sterling, with each back and forth likely to increase volatility.

EUROPEAN SHARES-Investors wait for major US data today

European stocks drifted significantly lower at the opening bell on Thursday alongside Asian markets and US Futures, with benchmarks now heading for a third bearish trading session in a row. This sudden change in investors‘ trading stance took place after the first slew of earning reports fell short of global expectations. This is especially true with Roche and Total in Europe while US investors have been disappointed by results from Bank of America and Wells Fargo. In addition, the fact the widely anticipated next US stimulus deal is unlikely to be reached prior to the presidential election is unwelcome news for stock investors around the world. However, the trading mood may change through the day as investors wait for major US data today, with the US jobless claims in sight, as well as results from Morgan Stanley and Charles Schwab. Most EU benchmarks, such as the DAX-30 Index, are now trading close to major support levels and a sharp reaction from bull traders will be needed today to prevent markets from deepening their bearish corrections.