This week, there has been continuous news about how countries are planning to vaccinate their populations. Recently we have had several pharmaceutical companies confirm their vaccine success rate, each having, to some degree, an impact on each currency whereby the respective government has bought a quantity of vaccines.
The UK has been a heavy investor in vaccines and is well placed to bounce back strongly as it has been reported that around 5 million people will have access to a vaccine by the end of the year. As a result, as we see more and more information on vaccines, the pound could see a general improvement in value. The AstraZeneca and Oxford University vaccine news has helped maintain sterling’s value towards a 6-month high against a basket of currencies.
The Office for National Statistics latest estimate is that 664,700 people in England had COVID-19 in the week ending 14 November, up just 1.6% from the previous week. Supporting suggestions that the curve may well be levelling off nationally. UK leaders have now announced an easing of rules over the Christmas period, whether this results in further lockdowns in 2021 is unknown.
In the UK the spending review is announced today by the Chancellor. This is normally a 4-year plan but due to the circumstance is only expected to cover the next 12 months. The Chancellor is already hinted he might be announcing a freeze on public sector pay and a cut to foreign aid spending, the FT reported. Many will be looking at potential suggestions or pointers where taxes may well be introduced to recoup some of the cost of the pandemic. The UK government borrowed a record £214.9bn between April and October, up from £45.8bn in the same period last year. It was also confirmed that UK consumer confidence fell to its lowest level since May in November as the economy faced a fresh round of lockdowns. UK retail sales rose by 1.2% in October compared to the previous month, and 5.8% compared to the same month last year as people perhaps started Christmas shopping earlier than usual.
Lastly, UK inflation picked up slightly to 0.7% year on year in October, largely due to rising clothing costs. As we move towards the end of the month Economic data is slowing down. Next week however as we enter December there is a host of data releases that could impact the pounds value.
Negotiations between the EU and UK over their post-Brexit relationship are ongoing and more and more expectation is building that a deal may be near. European Commission president Ursula von der Leyen said that “we have seen in the last days better progress” in EU-UK negotiations but that “there is still a lot of work to do”. After 4 ½ years of talks and with only 37 days until new policies are planned to be introduced there is still lots to deliver in time, even with government reassurances. In contrast however it has been reported in lots of media outlets that this weekend there could be a break in deadlock around the last point, being fishery rights in UK waters.
Saying that Brexit may remain in the headlines going forward after Boris Johnson’s government warned of ‘mayhem’ at Holyhead and other ports when the Brexit transition period ends, even if a UK-EU trade deal is agreed.
The Bank of England governor Andrew Bailey has also come out stating that a no-deal Brexit would cause even more long-term damage to the UK’s economy than the coronavirus pandemic, as reported in the Independent yesterday afternoon.
With news pending over the weekend, please ensure you are in contact with your account manager and have reviewed the tools available to manage your exposure if rates do swing as we enter a potentially volatile trading period.
This week there is a host of economic data released from the Single Currency. On Monday there was a reported improvement in the Manufacturing sector in initial forecasts for November. Today the financial stability review is released, looking into the health of the financial system. This reports on the ongoing distribution of the recent budget extension agreed in a form of interest free bonds being issued by the European Central Bank (ECB). There is still a legal challenge about which member states receive these, but this topic has really been overshadowed by other global events recently and not impacted the single currencies value. Tomorrow there is also private loans numbers along with ECB meeting accounts being released. Friday ends the week with business the climate report and Consumer Confidence, both of which could be interesting reading and may well impact currency values.
US news remains focused on the outcome of the recent US election. President Trump has now agreed to begin his presidency transition to Biden. This happened after the key state of Pennsylvania on Saturday discarded President Trumps campaign lawsuit. President Trump has however stated he continues to fight the result so most don’t expect this to be the end of the challenge.
US budget ceiling is also in conversation as national debt levels get closer to the agreed limit. Last week US treasury secretary Steve Mnuchin announced that the FED’s emergency lending programmes would not be extended beyond the end of the year. All pointing towards another challenging debate between both houses in the coming weeks.
Since the 2008 financial crash America’s national debt has climbed nearly 200% and now sits near a reported $27 trillion as of October. This year alone the printing of money has been almost continual with now over 22% of US dollars being less than a year old.
The US is not however on their own taking on these levels of debt. The Institute of International Finance estimates that total global debt across governments, households and businesses will reach 365% of global GDP this year, up from 320% at the end of 2019.
Economically retail sales were confirmed recently to have slowed in October while industrial output picked up to its fastest rate of growth since July.
Later today Durable goods data is released for the US economy along with GDP figures. Both of which could well have an impact on the USD value. The rest for the week from the US is relatively quiet as they celebrate Thanksgiving on Thursday, please take note of this as it may well impact delivery of international currency transfers.
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