With more Brexit talks taking place yesterday there are more unhappy parties as Downing Street has said there is still a chance of a no-deal if a deal is not agreed by the end of 2020.
A spokesman for the Prime Minister has said, there is absolutely no chance of the Prime Minister extending talks on the future relationship with the EU beyond 31 December. France has come out and said that the UK’s self-proposed deadline for a deal is to ‘blackmail’ the EU into accepting a bad deal.
Today, the prime minister will gather his newly reshuffled cabinet to sign a negotiation mandate before its publication and presentation to parliament on Thursday. The document which is expected to contain the plans for the Canadian style Brexit deal, however, this has already been ruled out by EU’s chief negotiator Michel Barnier. Also, French president Emmanuel Macron told the press he is unsure if a deal will be agreed and in place by the end of the year.
Mainland Europe has been struck hard by the continued effects of the coronavirus spreading out of China with Italy now having the most cases outside of China with a spike of more than fifty new cases being announced today, bringing the total up to 219 cases. This has caused a large number of people to be quarantined with travel to certain areas in and around Italy being restricted. This spike in cases has caused $474 billion to be removed from European stocks as investors become worried about the future which caused Milan shares to drop by over 5% and STOXX 600 dropped by 3.8%.
With this rapid change, attention has turned to the European Central Bank where the odds of a rate cut have been predicted as high as 50%. All this could cause some volatility in the coming weeks and months for the euro.
Germany will release its Gross Domestic Product (GDP) data today which could be a good indication of how the final quarter of 2019 faired for not just Germany but the rest of Europe.
With all the uncertainty due to the ever-changing virus news, investors are not sure where to go, which is why the USD has been heavily invested in due to its status as a safe-haven currency. However, the Greenback could be in for a rough ride with yields showing 10-year and 30-year decline and are down nearly 60 basis points so far this year, this was caused by the lack of inflation and the fears of the coronavirus uncertainty. Investors and the FED have been keeping a close eye on these recent pieces of data as they will be making an interest decision in a few weeks and the chances of a rate cut is seen to be at around fifty percent, with some investors seeing the chance being as high as 85%. However, the top officials at the central bank has said multiple times that they see no reason or need to cut the rate at the moment as the US economy is doing well and is too soon to judge to affect the coronavirus will have. To keep on top of market changes you may wish to speak with your account manager here at Foreign Curreny Direct.
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