At the close of business yesterday GBPEUR interbank exchange rates continued to sit at a heightened position. This is a positive sign for the common currency, however with political leaders still trying to secure trade deals between the UK and the EU the fate of the pound remains in their hands.

All eyes will be on Parliament over the next 24 hours as senior ministers are bracing themselves for Boris Johnson’s first major cabinet reshuffle since the election victory in December last year. Most of the cabinet have only been in their jobs for 6 months since Boris Johnson took over from Mrs May back in July, more senior members such as Sajid Javid, Foreign Secretary Dominic Raab and Home secretary Priti Petal are expected to remain in their positions, but other members may be at risk. Ben Wallace Defence secretary said he hoped to stay in his post, but reshuffles can be “brutal”.

Victoria Atkins, Olivia Downden and Lucy Frazer are among those who have been tipped for promotion and Stephen Barclay has been rumoured to make a return after his previous role was scrapped.

Boris Johnson approved the HS2 project this week with work on the line between Birmingham and London to commence in March. Mr Johnson is also expected to appoint a new minister to oversee the work on the line. This project has divided opinions, however economists believe this will provide a stable platform to help boost the UK economy in 2020 and help create thousands of new jobs.

Eurozone Growth

The eurozone growth remains modest but there are tentative signs of stabilisation. Germany’s factory owners are less gloomy than they have been in recent months, but they are still feeling the pinch of the US-China trade wars. Now, there is the added fear weaker exports because of the Coronavirus outbreak in China. China is Germany’s biggest trading partner and IHS Markit has previously said the spread of the virus would hurt German business sentiment.

Tomorrow we see the release of European GDP data, this is a measure of the Eurozone economic activity and health which will give us an insight into the current condition of the economy. Current predictions are at 0.1% Q on Q and 1% year on year.

US Interest Rate Decision

Fed Chairmen Jerome Powell remains optimistic on U.S. economy growth, despite Coronavirus threat

China has reported a sharp rise in coronavirus cases and deaths in the Hubei Province, the centre of the outbreak. The number of cases rose almost 15,000 the previous day with the death toll up by 242. China has sacked its top Hubai official after accusations that China has been under reporting the severity of the disease.

Some of the major Chinese factories opened on Monday but still many remained closed. Among the factories that opened some are likely to be operating at a lower capacity as not all employees will be able to return to work. Goldman Sachs estimated that providing the outbreak could be controlled in Q1, Chinese GDP could shrink by 0.1 to 0.2 giving a global growth rate of 3.25%. If the outbreak is not contained and continues into Q2 it could affect GDP by 0.3%.

Jerome Powell, Chairman of the Federal reserve, said that the bank is closely monitoring the potential spill overs from China. However, he sounded calm about the strength of the economy adding he sees no reason why the Coronavirus will affect the continued expansion of the US economy.

This afternoon we see the release of Jobless claims and CPI data in the US. Any deviation away from these figures could cause volatility for the GBPUSD currency pair.

 

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