Friday last week was not a positive day on the Brexit front as both UK Head Negotiator David Frost and his European counterpart Michel Barnier blamed each other for another week of impasse. They both provided statements on Friday afternoon with Frost suggesting the EU are only willing to solve fisheries and state aid before moving on to other topics, whilst Barnier suggested there is close to not being enough time.
It is well known that when it comes to negotiating with the European Union that everything is left until the last moment, which whilst not that far away is still quite far away in the world of negotiating. Sterling saw a real boost on Friday morning hovering just below 1.12 which was a 30-day high. However there has been a slight resurgence from that level, but as it has got to that point recently where there is always a chance it might bounce back.
This week is quiet on the data front with the main economic event this week being a speech from Bank of England Governor Andy Haldane on Wednesday. Haldane has recently been relatively positive with regards to the UK economy, certainly more than previous Governor Mark Carney. The recent economic performance of the economy has been slightly more upbeat. Whilst this isn’t likely to trigger any changes to economic policy, positive opinions for the direction of the economy could be well received for sterling.
The recent ‘Eat out to Help out’ has been a catalyst for the economy and whilst increasing the costs for the Government, it has provided much needed revenue across the hospitality sector. There is talk that Chancellor Rishi Sunak may well consider extending the scheme beyond the end of August which could further help to keep the UK recovery on track. The data in the coming months following very poor results for June and May could help to boost sterling as the figures are likely to be a dramatic improvement.
European Purchasing managers Index (PMI) fell below the expectation at the end of last week suggesting the bounce back in Europe may not be as swift as some might hope. PMI data is the survey of business executives across sectors and whilst the reading was a positive one it did not meet expectations. There is concerns across Europe that the recovery for the continent is expected to be slow and with such reliance on tourism in the south, the countries in the north of Europe are picking up the slack more than ever.
Angela Merkel and Emmanuel Macron met privately at the end of last week in the South of France as the two allies make plans for the future. Merkel has been clear for the last few years that she will be stepping down in October next year and Macron is thought to already be planning policies to make sure he gets re-elected in 2022. The impact of Merkel stepping down could start to become a factor at the start of next year as her leadership has been a stalwart of EU Politics for over a decade, the markets will certainly be interested to see who is chosen as her replacement.
In the more immediate future, we will see GDP data for Germany released on Tuesday which could have an impact on the market. The data much like in the UK is expected to show a huge contraction with the Year on Year and Quarter on Quarter expected, with figures expected to show over a 10% reduction. It will then be a wait to the end of the week to see the same for Italy and France, all of which will start to paint a clear picture of the state of the EU economy. This data will have the potential to surprise the markets and is due to be released around 7am in the morning so make sure you’ve considered this if you’re planning a currency exchange.
Joe Biden seems to be very much setting his stool out to win the Presidency as a couple of key speeches of late appear to have been received well. Biden is some distance ahead in the polls at the moment with poll trackers putting him on average around 8 points clear. The reality of Biden getting in as President has arguably started to take effect as the US dollar against sterling and euro in the past few weeks has given up reasonable ground. This is especially the case against the euro where the EUR/USD is currently at two-year high. Trump over the past four years has been seen as a business and economic focused President whilst Biden as a Democrat is more likely to introduce social policies and tax business. The markets are aware of this and provides a reason as to why the US dollar has started to lose value.
Biden and Trump are really starting to ramp up their campaigns with just over two months to go before the vote takes place. On Friday in the Senate the Postmaster General who leads the American Postal Service was testifying to Senators answering questions on how the postal service will cope with a mainly postal election. There has been fierce debate with regards to how safe a postal election can be with talk of the vote being rigged. Whilst the US has always offered postal voters there has never been a time where it will be the primary method.
Over the weekend the Trump Presidential campaign had a bit of a setback as special advisor Kellyanne Conway resigned. Conway was the first woman to win a Presidential campaign in 2016 and only a few months out from the next election this could be seen as unwanted disruption. Conway resignation followed a tweet from her daughter suggesting her mothers’ job with Donald Trump was ruining her life. As we enter into another week on the election campaign it will ne interesting to see if the wheels start to fall off for the Trump campaign and to see if Biden's lead grows.
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