Santa rally hopes fade

The direction of global stock markets has become increasingly convoluted today, with European indices rallying into the US open, only to fall heavily once more this afternoon.

Source: Bloomberg

The expiry of a multiple options across four different asset classes – so called quadruple witching – means traders were always bracing themselves for increased volume and volatility, which is clearly having an effect upon price action.

Despite seeing a very clear directional response to the Federal Reserve’s hike on Wednesday, there are significant market jitters following yesterday’s US led selloff as the promise of a Santa rally threatens to slip away.

Today marks the end of a busy month for many, with volumes likely to begin fading as we move closer to the bank holidays of Christmas and Boxing Day. That being said, there is a clear possibility that traders could continue to trade through the holidays as they take advantage of the highest six-months of FTSE volatility since the second-half of 2011.

The Canadian dollar fell to a 12-year low against the US dollar, following disappointing inflation data.

The Canadian economy is so intertwined with the value of crude, that irrespective of the threat of deflation, demand for Canadian dollar will suffer as export values fall. Thus add to that the threat of BoC easing and it is easy to see why the loonie is suffering so heavily.

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