It’s a quiet week in terms of UK data with the markets continuing to be driven by the upcoming general election. Sterling dropped back yesterday afternoon after recent polls by Kantar indicated the gap between the conservatives and Labour had narrowed. With 15 days to go until the general election can Labour bounce back?

Labour now sits at 30%, 13 points behind conservatives on the election, while conservatives sit at 43%. At this point last year, the lead by Theresa May was 11 points although cracks in her campaign were already beginning to show with attention being drawn to her “Dementia Tax” rather than the matter in hand, Brexit.

Boris Johnson however has focused his campaign on getting “Brexit done”. Boris has been fortunate in his campaign gaining 8 points since the start while Corbyn has gained five. Economists from the Guardian are putting these gains down to Nigel Farage’s decision to pull out of Tory seats rather than Boris’s popularity. Given the surge in sterling after Nigel Farage’s pledge, it is clear to see the financial markets are backing a conservative majority, but we can we be Corbyn Free by 2020 as Boris Johnson suggested.

Today we see new polls released by YouGov which is a closely watched poll and will seek to predict the outcome of the UKs December election. The MRP poll will be published first by the Times newspaper as confirmed by YouGov. The YouGov poll accurately forecast the hung parliament in the 2017 election and even accurately predicted that seats in Kensington, Canterbury and Chelsea would be won by Labour. The outcome of these polls will be closely watched and is likely to impact the markets if there are any significant changes.

Sterling did recover against the euro towards the end of the week following these data sets but the bad news in Europe is also bad news for the UK, since the UK relies so much on trade with the EU.

German Economy Continues to Be Affected by Brexit and Us China Trade War

Germany narrowly avoided recession in the third quarter with last weeks data showing growth of 0.1%. Investors will be keeping a close eye on the German economic data with the major sector being the manufacturing sector.

The worry surrounding the German economy is high said Jim Mccormick global head of desk strategy at Natwest, economic growth will remain weak but not as weak as expected. With Germany’s manufacturing industry being affected by both Brexit and the Trade wars between China and the US, any more surprises in economic output could put pressure on the euro.

High Level US and China Trade Talks Continue

The USA and China are close to agreeing the first stages of a trade deal, White House advisor Kellyanne Conway said yesterday. Top negotiators from the two countries spoke on the phone and agreed to keep working on remaining issues between the two countries.

US trade representative Robet Lighthizer and treasury secretary Steven Mnuchin spoke with Chinese vice Premier Liu yesterday. It has been stated by China’s commerce minister that both countries are eager to hammer out a new agreement to end a 16-month trade war that has impacted on global growth. A trade deal on phase one had been expected this month however experts are saying this could be carried over into the new year.

Analyst at Lloyds bank have stated that the ongoing trade wars are now having minimal impact on the markets and rumours of a trade deal are yet to have an impact on the currency market, stating that it is about time they “walk the talk”.

Outside of politics, it’s a busy day today for economic data in the US, this afternoon we will see the release of Initial jobs claims, Consumer Price Index and GDP data. Any diversions from the numbers predicted could cause volatility.

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