This week’s market commentary from David Jones, Chief Market Strategist at Capital.com

It’s a quiet start to the trading week, with US stock markets closed in observance of the President’s Day holiday. The Dow closed at its best levels in more than two months and has now rallied by over 4,000 points since the December low.  This “V”-shaped recovery has been impressive – and probably unexpected by most given the gloom that dogged financial markets in the last few months of 2019.  But despite the threat of trade tariffs and European economies slipping into recession, investors over the past couple of months have only been happy to buy the dips – and Friday’s strong close shows that sentiment is still positive.

Another market setting new highs after a dire end to last year is oil.  This morning, the US crude price eased above $56 a barrel for the first time in nearly three months.  This is another asset that has surprised many – the oil price has rallied by 30% since the lows in December, fuelled by OPEC cutting production and perhaps the feeling that the sell-off had gone a little too far. Given just how strong both oil and stocks have bounced back, it would not be surprising if investors and traders alike were starting to get a little nervous and thinking about taking at least some of their risk off the table.

When it comes to the pound, it is still a market very much driven by what is happening – or not – with Brexit.  Last week saw GBPUSD briefly slip below 1.2800.  This was the lowest the rate had been since Prime Minister Theresa May’s memorable record defeat in mid-January.  The lack of progress since then has weighed on the pound’s fortunes and meant it slid for most of February. As the Brexit deadline draws ever nearer, there potentially could be something of a turnaround in sentiment for the pound as traders bet that some sort of concessions will be made to avoid a no deal Brexit.