Trumponomics, the Federal Reserve, Emerging markets turmoil, oil prices, and Brexit negotiations were the biggest drivers of financial markets throughout the third quarter of 2018. These factors will continue to dominate for influence for the remaining three months of the year along with the upcoming U.S. midterm elections as a shift in the balance of power could impact Trump’s ability to govern.

U.S. equity markets outperformed the rest of the world so far this year, but many warning signals are starting to flash red. The U.S. economy is clearly in the late stage of the current economic cycle, but there are no signs of a recession yet. Valuations are overstretched compared to historic norms, and the Federal Reserve is expected to raise rates four times until the end of 2019. Given that U.S. equity markets seem to be priced for perfection, any negative surprises have the potential to end the longest bull market in history.

In currency markets, the U.S. dollar’s exchange rate has attracted much attention throughout the past several months, especially against EM currencies which many of them fell to record or multi years lows.

Argentina’s peso held the title of the worst performing currency in 2018, having lost more than half its value since the beginning of the year. The Turkish lira comes second, with more than a third of its value erased. While the South African Rand, Indian Rupee’s, and Russian Rouble fell less significantly, they still lost more than 10% so far.

Many of these economies face one or a combination of substantial current account deficits, external imbalances, shortages in FX reserves, and political risks that are leading to the selling wave. However, the dollar also appreciated against its major counterparts, especially commodity currencies. With the Federal Reserve continuing to tighten policy faster than the rest of the world, the short-term outlook remains in favor of a stronger dollar, but this upward trend will likely start fading when other major central banks follow the path of the Fed, especially that most currencies are undervalued in terms of purchase power parity.

Sterling will likely be the most interesting currency to trade in the final quarter of 2018. While a no deal Brexit could see the Pound falling 10%, the opposite case scenario has the potential to boost the currency by 5% or more. The Salzburg summit suggested that a lot of work still needs to be done in order to achieve a withdrawal agreement. By late October or early November, the UK’s future relationship with the EU should become clear, and every headline related to the negotiations will be a trading opportunity.

Watch U.S. politics, trade developments, Brexit negotiations, and oil prices. These factors will tell us all what we need for trading in Q4 2018.