Pound Problems, Witching Day and the US Stock Market

Markets were mainly dominated by the Fed's decision yesterday. However, this is part of an already new reality and you need to start getting used to it. Recall in this new reality, the dollar has a good chance of medium-term growth, especially against the British pound, which climbed exceptionally high against the dollar. This was largely due to both the general weakness of the dollar and the successful vaccination campaign in the UK and hopes for a quick economic recovery in this regard.

But the spread of the Indian strain of the Delta virus, if it does not put an end to these hopes, then greatly reduces their scale. Johnson this week has already postponed a full withdrawal of the lockdown for a month. And the number of daily cases of covid disease in Britain continues to grow and is already approaching 10K per day. But a month ago it was less than 2K. Another problem that in the near future may baffle the British economy may be the lack of labor.

Figures from Indeed job site show that searches for EU jobseekers to work in the UK in May were down 36% from the 2019 average. Low-paying jobs in hospitality, nursing, and warehouses saw the largest decline at 41%.

However, the pound is not the only candidate for sale. US stock market. Today we will not write about the bubbles and the Fed needle. And not because they wrote about it many times, but because today is the so-called "witching day". On the third Friday of March, June, September and December, stock index futures and options, options and stock futures expire simultaneously, which usually increases volatility. Traders randomly close positions, as a result of which trading volumes and market volatility can increase by one and a half to two times. Tellingly, according to BMO Capital, since 1990, in such weeks, the S&P 500 has lost an average of 3.1%.