The new Tier 5 lockdown will see the closure of everything accept essential shops along with schools which were de to go back this week.
The Prime Minister did provide some hope following his announcement that by the middle of February everyone over the age of 70 should have received a vaccine pointing out that it will be a few weeks after that they will be protected. This arguably suggests that by the end of February with the most vulnerable vaccinated we could see the country start to open up once more.
Following Sterling’s jump between Christmas and New Year after positive news from the Brexit deal, yesterday saw the pound give up most of those gains. This happened throughout the day yesterday as rumours of a national lockdown were creeping in. Nicola Sturgeon once again pipped the PM confirming Scotland would have a national lockdown in the afternoon which meant everyone knew what Mr Johnson was going to share the same fateful news by the evening.
This morning, sterling did start the day slightly higher than yesterdays lows, however following some good financial data through December with growth in GDP, the next 8 weeks will now doubt reverse that trend as the country shuts down. The key area to look out for will be Bank of England Governor Andrew Bailey, as there previously was discussions surrounding negative interest rates. Whilst this is likely to be a short-lived lockdown any further hints towards that could see the pound put under pressure.
China and the EU look likely to agree a trade deal in the coming weeks following seven years of negotiations which will see the Chinese invest heavily across Europe, whilst allowing European companies to operate more freely in China. This has been one of Angela Merkels key projects with the EU and she is hoping to have it in place before she steps down as Chancellor. She has however come under accusations of pushing the project through with some smaller states accusing the German leader of forcing the deal and not considering all the ramifications especially with the US. Smaller states are concerned that following the UK leaving the EU the French and German leaders will now be able to exert more control as the two main powerhouses.
Across Europe much like the UK there is also an increase in lockdowns with the German government pushing the current lockdown to the end of the month, France introducing curfews at the start of this week and it was much the same for Italy who have moved their ski season opening to the 18th January at the earliest.
For Germany this year there is a significant political calendar with Federal and State elections, Angela Merkel has already removed herself from the race so Germany will have a new Chancellor for the first time since 2005. There has been a surge of right wing politics in Germany especially in Bavaria where Markus Soder has become a popular character. Soder if he manages to gather momentum could well start to cause uncertainty for the euro as he is not as European focused as Merkel. He previously called for Greece following the bailout to leave the Eurozone, he will be one to watch moving forwards.
Donald Trump in his final days could have finally done his best to manage to find himself in a court room post presidency. Over a recorded telephone line the US President is heard saying to a Georgia Election Official “I just want to find 11,780 votes”. Trump who has been a keen accuser of voter fraud has now found himself in hot water for appearing to encourage an official to make sure the outcome falls in the outgoing Presidents favour. Even if he were to win Georgia it would not make any difference to the proceedings with Congress set to formally approve the election result tomorrow and the tradition of the inauguration set to take place on the 20th January.
Several Republicans have come out against Trump in the past few weeks, however all 10 of the living former US Defence Secretaries have formed a group and suggests Trump should not involve the military in voting disputes, which to many would be unthinkable. The President only has 15 days before his twitter account is deleted so if there was to be any major attempt from Trump to stop proceedings the next two weeks are his now or never moment.
As many had forecast in the runup to the election if Biden won, sterling has performed well against the US dollar over the last 6 weeks taking the GBP/USD interbank rate back to 1.37 at the high and 1.36 this morning. Biden is expected to have less focus on economic policies which is why we have started to see the US dollar lose some of its value. The GBP/USD at levels just below 1.40 will be approaching a three year high and the last time that rate was reached was the midst of the US/China trade war.
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