Sterling continued to buy the rumours and sell the facts surrounding Brexit and COVID-19. The rumours were that UK/EU Trade talks had turned the corner with large parts of the “level playing field” agreed leaving the prickly issue of fishing to be agreed. The result of the finishing line being in sight pushed GBPUSD up to 30-month highs. However, towards the end of the week Sterling retraced from the highs as another soft Sunday deadline was implemented once again by the EU. In another case of déjà vu we have seen this deadline elapse and talks continue. Hope remains that this will be resolved before the hard deadline as fishing only represents a very small industry in comparison to the remainder of economic activity on both sides of the Channel.
Sterling is weaker this morning following the news over the weekend of the introduction of tier 4 restriction being introduced, and Christmas restrictions tightened following the revelation that the new strain of COVID-19 is 70% more transmittable. London and large parts of the south-east have now been placed into a higher tier resulting in non-essential shops closing and travel restrictions introduced. This was followed internationally as several nations banned flights from the UK. Compounding the negative sentiment was that UK health secretary Matt Hancock mentioned the restrictions could be in place for months.
In the meantime, the Bank of England (BoE) once again put the UK on warning for negative interest rates. Gertjan Vlieghe, a Monetary Policy Committee (MPC) member stated that negative rates could provide the monetary stimulus to help aid a full recovery. Speaking to Bloomberg, Mr Vlieghe analysed the effects of the ongoing COVID-19 pandemic on the current economic situation, alongside the development of a vaccine.
Looking to the week ahead, the market may not be in its annual Christmas slowdown as plenty of issues remain, in particular for the UK. As mentioned earlier, the UK/EU trade talks are to continuing once again after missing the soft deadline of Sunday. With the Christmas holiday’s round the corner, time is eroding before the hard deadline at the end of the year. The focus will remain on the progress or lack of with regards to the fisheries. In the meantime, the economic impact of tier 4 restriction and increasing cases of COVID-19 will also be a key talking point and is likely to drive sentiment. As this is shortened week, we only have three days of data but news surrounding Brexit trade talks and virus will continue to be live.
- UK CBI Realised sales
- EZ consumer confidence
Sterling moved significantly lower on the open following the new restrictions and knock-on effects to sentiment and the economic environment. In the meantime, the CBI realised sales will now take a back seat following the news over the weekend. It is expected that we will see the sales index grow following November’s lockdown. However, it is likely that next month’s figure will now be back in negative territory. Across the Channel we have the Eurozone consumer sentiment which is expected to remain in negative territory.
- UK GDP
- UK public sector borrowing
- US GDP
- US consumer confidence
We have the final Gross Domestic Product (GDP) reading from both the UK and US with no changes expected to the big expansions, however given the current environment these are likely to be ignored. Borrowing figures in the UK are likely to be of bigger focus with regards to the current situation. Likewise in the US, amidst the outcome of the presidential election and the current climate the consumer confidence will closely watched.
- US Durable Goods
- US Weekly jobless claims
- UoM Consumer sentiment
The final full day of the week see a raft of economic data released from the US. The Durable goods examine the sale of larger ticket white goods and is expected to show a decline in sales which is not unexpected given the recent increasing in weekly jobless claims which is also set for release. Another sentiment figure is set for release from the University of Michigan, amidst the outcome of the presidential election and the current climate the consumer confidence will closely watched.
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