The regulatory border laid out between Northern Ireland and the rest of the United Kingdom is already coming under scrutiny after just 11 days since the UK officially left the European Union. Cabinet Office minister Gove received a letter from the RHA (Road Haulage Association) confirming a number of factories on both sides of the sea have highlighted their failure to meet supply retail contracts already.
With the pressure also mounting on supermarkets to keep their inventory up, particularly since the most recent lockdown being enforced, it will be interesting to see if the government is forced into adjusting its trade standards in the weeks and months ahead. Clearly this could put Johnson’s cabinet under further political scrutiny and so could impact exchange rates should this escalate.
The Scottish National Party provided a good example of this over the weekend, demanding the government to stump up billions of pounds to compensate the nation for the growing disturbances and financial complications Brexit is already beginning to cause. Leader Ian Blackford touched on the damaging impact the negotiated deal has had on Scottish fisherman who look certain to miss out on trade and growth opportunities on the international stage.
Despite the political pressures and indeed the anchoring effect this latest lockdown will continue to hold over the economy in the weeks and months ahead, there does still seem to be plenty of positivity across the markets. It is worth taking note that the FTSE 100 index finished the week 6% up with impressive gains coming in particular from the construction sector drawing plenty of attention. The promise of Swiss stocks to be brought back to the UK stock exchange in February also seems to have drawn investor appetite, marking the UK’s first move operating outside of the EU parameters to bolster it’s trading averages by an estimated €1.2bn per day.
It will be interesting to see if this trend helpssupport sterling’s value with foreign investors gradually feeling at ease with the UK economy’s recovery prospects, particularly as the vaccine is rolled out to the masses.
The market’s optimism might also be supported by the news that Chancellor Rishi Sunak is planning to delay tax rises until late 2021 in a bid to help support consumer spending which in turn might give UK PLC the momentum it needs to drive out of this crisis. Importantly, we will be given key insight into activity levels of UK households in the form of the Like-For-Like Retail Sales from the British Retail Consortium. A fall in figures here may well prove to be a market mover and so those looking for foreign currency might want to plan around this release as a result.
To date, the Bank of England have remained understandably cautious and so investors might be waiting to see if last week’s upbeat tones from the financial sector are also reflected in Tenreyo and Governor Bailey’s speeches this afternoon. It is worth taking note of the sustained slowing of prices within the UK housing market across November and December. Since the government confirmed they will not be extending the stamp duty break past March this trend is unlikely to reverse anytime soon.
Clients with an imminent US dollar requirement certainly have plenty to consider this week after last week’s rioting in Washington. Biden is faced with question marks even before his tenure has officially begun with calls for Trump’s impeachment having once again hit the headlines. Indeed the democrats have now laid out their plans with this story due to escalate as the week goes on.
The head of the NYSE has also drawn the spotlight on the soon to be inaugurated Biden with further speculation as to whether or not leading Chinese Stock should once again be re-admitted into US markets after Trump called for them to be temporarily suspended as part of the trade clash with China.
From a data perspective, after the clear adjustment seen on the GBPUSD pairing since added stimulus from the Federal Reserve was announced, it will be interesting to see if Wednesday’s inflation data holds any added weight with the markets. Deviations from the expected 0.1% year on year increase could send the US dollar onto a new trend once more.
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