Last week we saw a significant weakening of the US Dollar following comments from FOMC Chair Powell.  Fed Chair Powell stated before Washington that the US Federal Reserve will continue to provide strong support and are committed to using all the tools to get through this period – does this put negative rates back on the table?

In the meantime, at the same hearing Treasury secretary Mnuchin urged Congress to provide another £300bn pay check protection programme. The net effect saw the USD Index move to its weakest level since Apr 2018. Compounding the negative tone was the always highly anticipated US jobs numbers in Friday’s Non Farm Payrolls. The headline figure posted a figure of 245k, notably missing expectations of 460k, while the prior reading had been revised lower to 610k from 638k. This only highlighted the softness of the economy.

UK/EU Trade Deal Negotiations

Sterling remains sensitive to UK/EU trade talk speculation. There was optimism of a deal potentially being struck during the previous week. However, talks turned sour on Thursday evening as both claim the opposition were to blame for the breakdown. Friday saw talks resume whilst weekend negotiations were halted before restarting today. The stark reality is that the clock is ticking and the prospect of “no deal” is becoming more of a reality. This was further highlighted as France warned it could veto a trade deal between the UK and the European Union if it doesn’t like the terms.

On a positive, optimism that an end to the pandemic crisis is drawing nearer provided further support for risk appetite in global financial markets. The UK became the first country to approve the Pfizer/BioNTech vaccine, with the rollout expected to begin as early as next week. The most vulnerable parts of the population and care workers will be prioritized. Other vaccines, including Oxford/AstraZeneca, may also be approved soon.

Looking to the week ahead the focus will be on two main things, the continuation of the UK/EU trade talks and the ECB meeting. Michel Barnier, the European Union’s chief negotiator, told diplomats from the bloc’s 27 member states that it’s up to British Prime Minister Boris Johnson to make the next move as negotiators seek to break the deadlock over Brexit. The European Central Bank (ECB) is set to announce additional policy stimulus’ on Thursday, which was widely telegraphed at its last policy meeting in October. Of particular interest will be comments by the ECB surrounding the strength of the currency for the big move last month.


  • German Industrial Production
  • UK/EU trade talks resume

The focus today will be the resumption of the UK and EU trade talks following the breakdown of talks last week as the deadline approaches. The tone of ministers will be crucial. In the meantime the German industrial production is set for release.


  • German ZEW

The German ZEW index will be closely monitored due to recent developments in two areas, a vaccine and UK/EU trade talks.  The ZEW figure is a diffusion index based on surveyed German institutional investors and analysts and looks at the current and forward looking expectation of economy. In addition, the second reading of the Eurozone GDP with no change this morning.



Following the weak US labour data on Friday, the market will focus on the JOLTS data which focuses on job openings. The JOLTS data focuses on the number of job openings during the reported month, excluding the farming industry


  • ECB Meeting
  • US Consumer Price Index

The headline scheduled event of the week will be the ECB meeting. The ECB is set to announce an additional policy stimulus, which was widely telegraphed at its last policy meeting in October. Of particular interest will be comments by the ECB surrounding the strength of the currency for the big move last month. The recent rise in the currency has occurred after the likely cut-off date for the ECB’s new projections and, if sustained, would represent a tightening of monetary conditions. That might point to the risk of more policy stimulus next week than central forecasts would suggest. In the US, inflation data will be closely monitored in the form of the inflation data.


  • BoE Financial Stability Report
  • US PPI
  • US UoM Consumer Sentiment

The BoE Financial Stability Report is a bi-annual report that makes an assessment of conditions in the financial system and potential risks to financial stability. Given the economic backdrop and pessimistic forecasts such as raising unemployment the market will keep a close eye on the news wires associated with this report. In the meantime, given the softening of the US economy in recent weeks, the market will focus on the both inflation and consumer confidence data from the region.

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