There was talk of progress over the last few weeks however Prime Minister Boris Johnson over the weekend suggested there was still differences between the two sides.
This week the Governments Brexit Bill is set to be rejected by the House of Lords, the Bill would have changed some of the commitments from the Withdrawal Agreement. The changes to the Bill have also been commented on by the next US President Joe Biden who has heritage ties to Ireland, he suggested that the Government's Bill is potentially a threat to the Irish peace deal. Dominic Raab speaking on the Andrew Marr show said the UK Embassy had congratulated Biden and the relationship between the two nations will be as strong as ever.
Today starts a busy week of data and speeches with Governor of the Bank of England Andrew Bailey this morning. Bailey is expected to find deliver his latest assessment of the UK economy providing insight into what the Bank of England can do to help the situation. Tomorrow the claimant count and the unemployment rate will be revealed and following the pandemic the results are expected to be high with the unemployment rate rising to 4.8%. Wednesday is then a quiet day for data however on Thursday Gross Domestic Product, Industrial and Manufacturing Production are due. Furthermore, there will be another speech from Bank of England Governor Andrew Bailey.
Sterling has fallen off last week’s highs of 1.1140 against the Euro which was a 2-month high. However, it is much the same as the last few weeks that any progress on a Brexit deal is likely to be the catalyst to a GBP/EUR spike.
UK Negotiator Lord Frost and EU counterpart Michel Barnier are in talks all this week hoping to find a breakthrough in the negotiations. The UK has made it clear that it is willing to accept a Australian style trade agreement, which means there is sector-by-sector agreements in place that would mirror the same agreement the Australians have with the EU. This does however mean that the UK would be trading with the EU on largely WTO trading terms. Prime Minister Johnson added on Sunday that he believes a more comprehensive deal like the EU has with Canada is also “there to be done”.
Whilst the Brexit negotiation is one of the main headlines, there is a second crisis developing in the Eurozone regarding deflation. There is a real concern that there could be a “double dip” recession across the continent. The main solution to this problem is for more spending to be implemented by the EU however there is little appetite for that from the strong economies who believe they will be picking up the bill.
The EU already has negative interest rates for deposit rates and overnight rates and if the ECB were to raise that level it could create increased pressure on the banks. There is expected to be the release of the stimulus package for Coronavirus at the start of next year but that was agreed before the first lockdown took place and €750bn is likely not enough anymore.
Over the weekend it was essentially confirmed that Joe Biden will become the new President of the United States, with Kamala Harris set to become the first women to be Vice President. Current President Donald Trump has declared that he will continue to contest the results following "illegal ballots counted" in his words however there is still no evidence to support this. Trump has used the last few days of ballot counting as an opportunity to play a couple of rounds of golf, which is no doubt presenting a opportunity away from the spotlight planning what he will do next.
For those who're waiting to see Biden become the new President his inauguration will not take place until 20th January, however the Presidential transition normally starts around this point. It will be interesting to see if this is a civilised process between Trump and Biden, Trump may apply the logic that for as long as he is in the White House he can still be President a bit like 9/10ths of ownership is possession. Interestingly even First Lady Melania who was thought to be telling Trump to concede has even backed her husband suggesting that only legal ballots should be counted, arguably this is one of the first times she has publicly supported him on something.
The GBP/USD rate has climbed to 1.3199, which following a spike two weeks ago is the first time since the start of September that we have seen those levels. The market on the Thursday morning last week dropped to 1.29 when Trump was believed to be in front however that has now been reversed. There was an expectation that the US Dollar would lose ground following a Biden victory however it will be interesting to see this week if that trend continues.