Last week market sentiment was jumping around amidst global events, in large from the US. Firstly, newswire saw Joe Biden and his running mate, Kamala Harris, declared as winners of the US Presidential election, pending legal challenges from the Trump camp; these are still ongoing. However, the big shift in investor sentiment was driven by the news of a COVID vaccine. German company BioNTech and the US pharmaceutical giant Pfizer announced via a press release on Monday that their jointly developed vaccine candidate had outperformed expectations in the crucial phase 3 trials, proving 90% effective in stopping people from falling ill. This resulted in equity and oil markets pushing significantly higher whilst the US Dollar weakened as a result. As the week progressed investor sentiment tapered as the market continued to decipher and articulate how this can be rolled out and what challenges remain.

In the meantime, the UK’s economic challenges remain as data disappointed somewhat. The UK jobs data reinforced unease over labour-market trends, especially a sharp increase in redundancies. The headline unemployment rate rose to 4.8% from 4.5%  An extension of the furlough scheme provided an element of relief and Sterling was also protected by optimism that vaccine developments would help provide a key lifeline for the economy. The UK’s economy bounced back from recession with record growth of 15.5% in July to September, this was slightly below expectations. Furthermore analysts warned that it was likely to shrink again in the final three months of the year because of the impact of renewed lockdowns in different parts of the country.

Brexit developments also hindered Sterling in the latter half of the week. Firstly, Joe Biden used his first phone call with Boris Johnson as U.S. president-elect to warn the British leader not to compromise peace in Northern Ireland in his pursuit of Brexit. This was swiftly followed by EU sources reporting on Wednesday that EU and UK negotiators would not be able to seal a trade agreement this week with the mid-November deadline missed. The sources added however, that the aim was to complete a draft legal text by the middle of this upcoming week. The departure of two of the most senior figures from the Leave campaign from Prime Minister Boris Johnson’s inner circle may change the direction of talks. However, the U.K.’s chief negotiator, David Frost, said he “will not be changing” his position in discussions with his EU counterpart.

Monday

  • ECB President Lagarde Speaks
  • Empire State Manufacturing Index

ECB President Lagarde is due to speak at the World Economic Forum’s Pioneers of Change Summit, following her recent comments on monetary policy and the market still trying to decipher what level of stimulus is likely to be announced in December. As head of the ECB, which controls short term interest rates, she has more influence over the Euro’s value than any other person. In the US, the manufacturing data from the Empire State (New York area) is due for release and will be watched to see if the recent increase in COVID has impacted.

Tuesday

  • BoE Gov Bailey
  • US Retail sales

The Bank of England Governor is due to speak at a virtual conference hosted by CityUK. As head of the central bank, which controls short term interest rates, he has more influence over the nation’s currency value than any other person. Given the ongoing rhetoric surrounding interest rates his tone and language will be closely monitored. US consumer spending will under the microscope as retail sales hits the wires.

Wednesday

  • UK Inflation data
  • US Housing starts and building permits

UK inflation data historically is one of the most highly anticipated figures for the month but given current policy and the environment we find ourselves in, it is unlikely to change central bank policy. In the meantime, US housing data in the form of housing starts and building permits is a good forward looking barometer of the economy due to the jobs and spending associated with the sector.

Thursday

  • US weekly jobless claims
  • US Philly Fed Manufacturing
  • ECB President Lagarde Speaks

As a result of the pandemic, jobs have been closely monitored globally. The weekly jobless claims provides the market with weekly insight on the direction of the labour market ahead of the monthly government figures. The Philly Fed manufacturing data survey of about 250 manufacturers in the Philadelphia Federal Reserve district which asks respondents to rate the relative level of general business conditions. In the meantime, ECB President Lagarde is due to speak at an online event hosted by the Women’s Forum. Her rhetoric will be scrutinized for clues on policy action in December which has be signposted previously.

Friday

  • UK retail sales
  • UK public sector borrowing
  • ECB President Lagarde Speaks

The UK October retail sales update will be for the period before lockdown. After several months of strong returns the market is expecting a modest fall for October. Spending habits have changed in recent times as consumers start to focus on Black Friday sales. In the meantime, public finances for October will provide further evidence of the negative impact of the pandemic on the budget deficit. It will come ahead of the following week’s public spending review and the Office for Budget Responsibility’s forecast updates. ECB President Lagarde is due to speak at an online event hosted by the European Banking Congress. Her rhetoric will be scrutinized for clues on policy action in December which has be signposted previously.

November FX forecast

Read our Monthly FX Forecast for a longer-term view of currency movement.

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