The topic of Brexit remains a key factor in how the pound will fare in the run up to the end of the year. The pound has had a couple of positive days during the month with the news that both the Pfizer vaccine and the Oxford vaccine are in the process of being rolled out over the next few weeks.
The reason why this has helped the pound is that the UK economy is heavily impacted with the service industry. The US and other European countries have shown signs that their recovery will be quicker than the UK so the news that the vaccine is coming was seen as more of a positive compared to the other nations and this has been reflected in the value of the pound.
Brexit will once again take centre stage over the next few days as the talks continue over the weekend. At the moment it is unclear whether or not EU Chief Negotiator Michel Barnier will attend the talks.
Prime Minister Boris Johnson has stated that the UK plans to cut foreign aid from 0.7% to 0.5%, much to the annoyance of senior Tories. This amounts to as much as £4bn and supports Chancellor Rishi Sunak’s plans to support the economy with his latest Spending Review.
Ursula von der Leyen has suggested that the bloc needs to be more ‘creative’ to get past the issues caused by the break down in talks of the fishing rights, as well as common standards across the two areas.
With Barnier threatening not to come over, if the talks once again stall, then this could cause the pound to struggle. However, if he does make the journey then we could see some support for Sterling exchange rates.
In the mean time Boris Johnson is facing some problems within the Tory party over the lack of evidence for the recent COVID restrictions. With most of the country under tier 2 or tier 3 status this has caused uproar with some of the party.
199 Committee Chairman Sir Graham Brady has claimed that he will vote against the current plans when the vote is made in parliament over the next few days.
The European Central Bank (ECB) held its latest meeting yesterday afternoon and was relatively cautious about its current bond-buying scheme. The minutes published highlighted the Central Bank’s concerns about what is happening with inflation and how they will manage the situation going forward.
There are rumours that we could see further LTROs (loans) of €500bn in the months ahead in order to combat the problems caused by the Coronavirus and the subsequent problems caused by the lockdowns on the continent.
It has been confirmed overnight that Michel Barnier will resume the Brexit talks in an attempt to take things forward. With less than 5 weeks to go before the end of the year deadline then we are quickly running out of time for a deal to be agreed in time.
If no deal is agreed between the two sides then the trading between the two areas will go into World Trade Organisation (WTO) rules. This would mean an introduction of tariffs and this could affect certain imports and exports between the two sides so they are clearly keen for this not to happen.
Barnier has adopted a very firm position and although he is open to further negotiations he wants to make sure that the UK are open to talks otherwise there is little point in him continuing the discussions.
One of the remaining topics still to be decided is that of the fishing rights between the UK and the European Union. It does not account for a huge amount of the economy but more of a power struggle between the two sides but it is important that an agreement can be reached as this could mean no Brexit deal before the end of the year.
The euro has made some small gains vs the pound so far this morning following the release of better than expected French economic data. French Gross Domestic Product (GDP) hit 18.7% against the consensus of 18.2% and this has given the single currency a boost against both the US dollar and the pound Sterling.
Later today the Eurozone will announce Consumer Confidence data for November as well as Industrial Confidence data for the previous month. If both come out better than expected we could see some further euro strength to end the week.
With the US celebrating Thanksgiving yesterday the US Dollar remained in a tight range against both the pound and the euro. However, the US dollar since the election has been under pressure and as yet Donald Trump has still yet to concede against Joe Biden and whilst this uncertainty continues this could cause further issues for the US dollar against a number of major currencies.
Trump has stated for the first time since the election that he will leave the White House if the Electoral College votes for Joe Biden but that he’s not prepared to give up without a fight. Trump went on to state that ‘it’s going to be a very hard thing to concede because we know there was a massive fraud.’
A number of lawsuits aimed at helping to keep Trump in power have been thrown out and a few days ago the General Services Administration announced that the process of transition can begin as soon as required.
On Tuesday the US Federal Reserve (Fed) Chair Jerome Powell is due to take centre stage and will be holding a statement covering the latest news on the US economy and current monetary policy. With a change in Presidency coming over the next few weeks it will be interesting to see if there is any slight shift in sentiment from Powell.
During the first two months of lockdown in the US we saw a loss of 22 millions jobs. Since then we have seen 12 million jobs created so an overall loss of 10 million jobs. At the end of next week the US will release its latest Non-Farm Payroll data with expectations for 425,000 so anything different could cause further movement for the US dollar.
The GBPUSD exchange rate hit it highest level to buy US dollars with pounds in weeks as optimism surrounding Brexit is slowly increasing that a deal can be reached between the two parties involved.
Indeed, GBPUSD exchange rates have been trading in a positive direction for over a week now creating some decent opportunities for anyone sending funds to the US at the moment.
The problems between the US and China remain and this is also causing problems for the US Dollar. A deal was agreed earlier between the two sides but with the US having put sanctions on a number of companies owing to the Iranian missile programme this has caused relations to sour a little.
Therefore, if you have an upcoming currency requirement it would be prudent to prepare for a lot of volatility next week. Get in touch to discuss these factors in further detail, or to get monthly updates about the currency markets, and what's impacting them by signing up below.
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