Pick Your Trades Carefully as Markets Remain Uncertain
The uncertainty continues this week, but while last week uncertainty induced some large moves, this week it has reduced volatility
Last week we saw some large moves in most major assets in financial markets. The FED turned bearish last Wednesday which increased the uncertainty regarding global economic growth, hence the increased volatility. Although, yesterday the volatility was really low.
This is another side effect of uncertainty. When markets are uncertain, they might be quite volatile like last week as traders switch sides often or try to close their trades. Or they can be pretty quiet as traders are unsure which side to take, so they just remain on the sidelines.
So, this week it seems like the markets are going for the second option. Yesterday we had a couple of FED members reinforcing the idea that the FED has shifted to neutral now. They said that the FED will either pause or hike interest rates just once. There were also a couple of ECB members who confirmed that the Eurozone economy is in trouble and the ECB was turning from neutral to dovish.
These factors increase uncertainty regarding the global economy and the future path of the monetary policy. Besides that, UK Prime Minister Theresa May lost the support from the DUP Party for the next meaningful Brexit vote which should take place this week but now we’re unsure if May will go ahead for the third BMV3 vote.
So, uncertain times, hence the lack of direction in most assets and the small moves this week. The economic calendar is also pretty light this week, so let’s see if anything comes along to get markets moving. For now, we’re trading with short term signals/trades, trying to get 20-30 pips here and there until markets find their direction.
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