This week was the intersection between October and November. It was an important week for the market mostly because it brought the volatile month of October to an end. The chart below shows that the CBOE volatility index decreased after October ended.
Trader was an important topic this week. Yesterday, Trump revealed that he had had a long discussion with China’s Xi Jinping on trade. The two leaders agreed to have a comprehensive discussion on trade when they meet later this month in Argentina for the G20 summit. Today, it was revealed by Bloomberg that Trump had directed his trade team to come up with a policy framework that will be signed in the G20 meeting. If a deal is made, it likely bring to an end a long debate that has led to the reduction of the growth forecast by IMF. It has also led to increased uncertainty among the market participants.
This week, the price of crude oil continued to decline. This was a continuation to the declines seen a week ago. The decline was caused mostly by the increase in supply by the US and OPEC. This week, data from the American Petroleum Institute (API) showed that the amount of crude oil inventories rose by more than 6 million. The data from EIA came a little short at 3.5 million. Nonetheless, the data shows that there is a lot of supplies in the sector. Yesterday, data from OPEC showed that the members had increased the supplies significantly. These supplies were mostly from Saudi Arabia, United Araba Emirates (UAE) and Libya.
This week was important in the United States as politicians continued to campaign for the upcoming mid-term elections. These will be important elections because they will determine the future of the Trump agenda. A win by the democrats will likely mean obstruction for Donald Trump. It may also mean that some of the gains the Trump administration has done will likely be reversed. On the other hand, a win by the republicans will mean continuity for the Trump agenda. It will also be the first time in a long time that the president’s party has won the mid-term elections.
This week, the two main central banks that released their interest rates decision were the Bank of England (BOE) and the Bank of Japan (BoJ). The two banks left interest rates unchanged and signaled that status quo will remain. The BOJ is not expected to hike rates as the country struggles to stimulate inflation. The chart below shows the performance of the USD/JPY pair.
Brexit was an important topic this week. On Wednesday, the Brexit minister said that he was hopeful that a deal will be reached in the next two weeks. This was a major unexpected news that came when hopes of a Brexit deal were diminished. The announcement – which he later retracted – was important in that it led to a sharp increase in the value of sterling as shown below.