Suspension of COVID-19 vaccine trials
Strengthening of the USD
Deteriorating epidemiological situation in the EU
The worrisome situation on the financial markets remains to be. Growing economic and geopolitical uncertainty significantly reduces investors' appetite for risk.
At the beginning of last week a very strong blow to risk assets was caused by reports about the suspension of COVID-19 vaccine testing by two companies at once. Many investors have revised their expectations about the possible timing of vaccine development. It is obvious that the first licenses for the vaccine will be issued not earlier than the 1st quarter of 2021.
The market has reacted painfully to these news as the numbers of new infections in Europe and parts of the US has been growing rapidly in recent weeks. Some EU countries, including the UK and France, have again been forced to strengthen quarantine measures to curb further spread of the virus.
Concerns about the epidemiological situation were expressed by German Chancellor Angela Merkel. She admitted that the economy will not survive another lockdown and the country's authorities should do their best to contain the disease.
On the currency market, the trend towards strengthening of the US dollar dominated most of the week.
Investors see the U.S. currency as a protective asset and are actively buying it against the background of increasing uncertainty in the market. Demand for other G7 currencies declined significantly and they completed trading in the red zone against the dollar.
Demand for the European currency was limited by reports of a worsening epidemiological situation in the region and an apparent slowdown in economic recovery. Uncertainty surrounding Brexit remains an additional factor in the pressure on the euro and the pound.
At the EU summit, which took place on Thursday and Friday, the EU countries actually noted the lack of progress in the negotiations. At the same time, the EU countries agreed to develop a more rapid action plan in case of UK's exit from the EU without a trade agreement.
Precious metals market.
Gold was traded mainly in the red zone during the week, despite increased interest in protective assets. The U.S. dollar was a strong competitor to precious metals, which was preferred by investors. While the dollar remains strong, gold has limited opportunities for growth.
The oil market was characterized by increased volatility. Investors reacted painfully to reports of a possible slowdown in global economic recovery due to a new outbreak of the pandemic. But thanks to positive statistics from the USA, oil prices were able to hold on to positive territory.
The main world indexes have finished the week in the red zone. Investors are abandoning risk amid growing uncertainty. The upcoming U.S. presidential election is likely to only increase nervousness in the market.