We’re now just 10-days away from the UK’s scheduled departure from the EU, although many of the concerns surrounding the manner in which the UK will leave have calmed over the past few months.
Perhaps the next Brexit related currency fluctuations will stem from the negotiations between the UK and the EU throughout the remainder of 2020, with UK Prime Minister Boris Johnson hoping to have these wrapped up by the end of the year.
Economic sentiment surrounding the UK’s prospects have picked up, with some market commentators referring to this as the ‘Boris Bounce’. Earlier this week the IMF (International Monetary Fund) predicted that the UK will actually grow faster than its Eurozone rivals through 2020 and 2021. Last year UK growth was 1.3%, and this is expected to grow to 1.4% this year followed by 1.5% in 2021. There was also a sharp increase in UK property prices during December, and according to online estate agent Rightmove they grew at the fastest rate on record (Rightmove started its House Price Index in 2002).
Despite the uptick in UK economic data, the Bank of England is remaining cautious with predictions of an interest rate cut next week increasing to a 70% chance according to a Bloomberg report released on Friday. The decision will be announced next Thursday and could overshadow any expected market movement next Friday on the official Brexit departure date. Yesterday’s positive job’s release could undermine the case for the interest rate cut though, as jobs created in the 3-months to November last year hit the highest levels in a year. Do make us aware if you wish to plan around next week’s events.
Data releases out of the UK are light for the remainder of the week, but it may be worth following Friday morning’s release of Services PMI which is a forward-looking indicator regarding the UK’s most important sector.
ING, the Dutch investment bank has predicted that the European Central Banks interest decision and subsequent statement this Thursday will offer little in the way of market movement. Analysts expect there to be no new economic projections announced along with no interest rate changes. Despite this, it’s worth being aware of though as it will be incoming ECB president Christine Largarde’s first policy meeting so there could be the odd surprise or change in approach.
Safe haven currencies such as the Swiss franc, Japanese yen and to an extent the US dollar saw gains yesterday, as fears surrounding the new coronavirus in China resulted in a cautious approach from financial traders. News broke yesterday that over 300 people have been infected with 6 people unfortunately passing away as a result of the virus. It’s being likened to the deadly 2002/03 spread of SARS and with Chinese New Year just around the corner it’s become a cause for concern. Global equity markets also fell with the UK’s FTSE 100 having its worse day in seven weeks due to these concerns.
Financial markets will also be following proceedings in Davos as US President Donald Trump will continue to take centre stage. He’s currently under pressure due to the ongoing impeachment trial, and it wouldn’t be unusual if he were to make some strong comments in order to take the spotlight away from this trial.
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