Christmas is here – a time of families getting together. Only this Christmas, like the entire 2020 so far, is different than usual.
The virus continues to pose new challenges to the Northern hemisphere. While Australia, New Zealand, and other countries in the South benefit from the warm weather, the rest of the world has a tough time fighting the spread of the virus.
In a stunning turn of events, the United Kingdom announced over the weekend that it will “cancel Christmas.” While it looks like the name of a movie, unfortunately, it is not. A new variant of the virus appears to circulate within the United Kingdom, causing a 180 degrees turn in the way the country handles the holidays.
The decision quickly triggered reactions in other European countries. Italy, the Netherlands, and Belgium already announced the suspension of flights to and out of the United Kingdom. Other countries will likely follow with similar measures.
What should traders expect from the short trading week ahead?
All Eyes on the United States
The Fed’s decision may be behind us, but the price action this week (and the one after) will likely be driven by the U.S. stock market. With no important economic events to consider, the market participants will focus on the stock market’s price action, Brexit, and the virus.
Out of the three, the U.S. stocks’ performance should weigh more from a trader’s perspective. Tesla joins the S&P500 today in a move that generated controversies in the financial world, as its share’s volatility will spell trouble for the overall market and the correlated assets too.
The COVID-19 virus remains the exogenous factor able to turn investors’ sentiment in a blink of an eye. If the United Kingdom’s situation gets worse, or the new virus’ variant is discovered in other neighbouring countries, all bets are off. Also, we do not know if the vaccines being rolled out at this point are effective against the new variant of the virus. So far, it appears they are, but this is a risk we should all consider.
Finally, there’s Brexit. With so much at stake and with the virus taking all the headlines, Brexit remains lurking in the background. However, it still has the potential of creating volatility on the GBP and EUR pairs.
To sum up the week ahead, while shorter than usual, is equally important as any other.