Boris Johnsons leadership will be tested this week as the UK, come Thursday, will arrive at the self-imposed Brexit deadline. There is still thought to be unagreed factors of the UK and EU’s potential trade deal and come the end of the week we will know if the UK will agree a deal or start preparing for a hard Brexit.
This could mean we’re set to have an incredibly volatile week and if the UK does agree a trade agreement with the EU. Sterling could see some of its biggest gains in several years. Adding to the drama of Brexit Bank of England Governor Andrew Bailey will deliver a speech at 4pm today, which may provide some guidance on how the recovery in the UK is going and if the BoE will consider further economic stimulus.
Tomorrow we will then see the latest unemployment figures which following the pandemic will be eagerly anticipated. The market reaction will be formed based on how close the real figures are to the expectation. If the number is either greater or lower than predicted we could see the market move. Whilst most people expect the results not to be good following major redundancies, it will provide a indication as to how successful Rishi Sunak’s furlough scheme has been.
Boris Johnson on Saturday was on a phone call to French President Emmanuel Macron where he once again reaffirmed the UK’s commitment to agreeing the deal with the EU. Macron in the last few years has been very vocal with regards to the UK’s position on Brexit pushing the idea that the UK cannot cherry pick the best bits of the EU.
This week with the UK’s chosen deadline coming into play it will be interesting to see if a barebones deal has been agreed. This would be a deal with the bare minimum organised, which is little more than a namesake of an agreement. However it will mean financial markets are no longer in fear of a no deal Brexit.
The euro has also experienced volatility from the Brexit disruption so whilst many expect the pound to gain off the back of a deal, we might see subdued gains against the euro as some confidence may also fall back into the single currency.
Christine Lagarde who is the President of the European Central Bank will speak today like UK counterpart Andrew Bailey. The European economy has been hit hard especially in the south as the tourism industry was pulled from beneath the Mediterranean countries. There is talk that the EU may introduce even further stimulus so this speech could cause a reaction in the market.
The US Election is only 21 days away, with Joe Biden still firmly ahead in the polls with many expecting him now to be the eventual winner. It appears that even the UK Government are expecting this to be the case and are thought to be beginning a charm offensive on Joe Biden. There are reports that No10 has written of Trump’s chances of winning and believe Biden is going to prevail.
This could be a pivoting moment for the UK in their attempt to agree a trade deal as Trump was Pro Brexit and encouraged the UK to go alone. Biden alternatively last month spoke out against the UK Government when they attempted to make changes to the Withdrawal Agreement. Biden has a strong affection for the Irish with whom he has heritage with and is unlikely to agree with Boris when it comes to potentially risking peace on the Irish border.
However, first things first, Biden will need to win the election that at the moment so many believe is still on the fence. There is a increased scepticism of polls in the last few years after a several upsets around the world, therefore until either has conceded defeat it wont be clear who the winner is.
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