The risk pendulum swung back and forth this week as investors juggled with conflicting themes influencing global sentiment.

On one side of the equation, vaccine optimism boosted investor confidence and increased attraction for global equities. However, surging coronavirus in the United States coupled with lockdown restrictions in Europe capped risk appetite, lending minor support to safe-haven assets. The pressing question on the mind of many investors was where will the markets go from here?

Good news from Moderna on Monday afternoon brightened the market mood. The American biotechnology company revealed its experimental vaccine was 94.5% effective in preventing Covid-19 – ultimately injecting financial markets with a heavy dosage of optimism.

On Tuesday, Tesla was the talk of the town after the S&P 500 Dow Jones indices announced that it will be included into the prestigious S&P 500 index on December 21st. 

All eyes were on the US retail sales figures earlier in the week for fresh insight into the health of the largest economy in the world. Given how sales increased less than expected in October, this strengthened the argument for the Fed to buy more bonds through its QE program as soon as December.

Interestingly, the bright mood across markets dimmed mid-week as investors once more focus on the latest surge in infections and the potential US lockdowns which may come after Thanksgiving next week.

In the United Kingdom, Brexit talks were in the spotlight following reports that a post-trade deal may be secured by early next week. We discussed the possibility of the GBPUSD hitting 1.3300 in our mid-week technical outlook. Prices are trading marginally below 1.3300 as of writing.

More good news on the vaccine front offered support to equity bulls on Wednesday. Pfizer announced that a final analysis of clinical trial data showed its Covid-19 vaccine was 95% effective.

After rallying to record levels, equity bulls took a breather as vaccine hopes clashed with virus fears. As the week slowly comes to an end, Stock markets are on route to ending on a mixed note amid the rare public rift between the Fed and US Treasury over emergency lending facilities.

Grab your popcorn and get ready for potential drama and volatility in the week ahead amid the growing list of themes impacting financial markets. 

If the spat between the Fed and US Treasury escalates, uncertainty may intensify at a time where the US fiscal remains in limbo. Concerns over the delay in the transition of power to President-elect Joe Biden may compound to the unease and mounting sense of caution. It will be interesting to see how this impacts the Dollar Index (DXY) has dropped almost 2% this month.

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