Morning Report – Friday 20th November
Jon Robson, head of Trading – “The U.S. looks to be only a few weeks behind Europe in enforcing new coronavirus restrictions. The ordering of bars and restaurants to close by 10pm and schools closures in certain states looks ominous. The dollar could be granted a short term reprieve if a full lockdown is enforced. ”
Brexit plans were scuppered somewhat yesterday as Michel Barnier revealed that one of his team had been infected with Covid-19. Barnier has plans to return to the UK to finalise an agreement, which is reportedly very close. Sterling dropped on this news, but it is not expected to affect negotiations as they will now be done virtually.
Rudy Giuliani held a press conference yesterday afternoon to provide ‘indisputable evidence’ that Joe Biden had cheated his way to the presidency, but the claims turned out to be unsubstantiated conspiracy theories. Later on, Trump was delivered a blow, as Biden’s victory in Georgia was confirmed by the Secretary of State in Georgia.
UK public spending increased to a record high, as spending exceeded revenue by £260 billion from April to October, due almost entirely to Coronavirus provisions. The size of deficit is smaller than first feared in the summer, but that will not stop Conservative backbenchers, who are angered by the amount of fiscal spending, raising fervent concerns to Boris Johnson.
The pound is higher against both the euro and dollar in early morning trading today. Sterling continues its upward trend as investors still believe that a Brexit deal is imminent. UK retail sales were released today and surprised to the upside by increasing 1.2%, while they were expected to have no change. However, a large fall will most be likely be felt in November, when increased Coronavirus restrictions are fully felt.
The euro is unchanged against the dollar this morning. EU officials have still made no headway in bridging differences in the huge stimulus package in preliminary talks. If an agreement is not finalised, at least in principle, then the plan will not be in place for the start of 2021 as originally planned.
The dollar is rangebound against a set of major currencies including the Japanese Yen. There is no notable economic data to be released today, so the dollar will be dictated by ongoing talks between Chuck Schumer, Nancy Pelosi and Mitch McConnell. However, it will be a long time until both sides come to an agreement as this second round of talks has just started.
US futures have dipped this morning due to the dispute between Steve Mnuchin and the Fed over its emergency lending facilities. Global equities remain in a lull as increased Coronavirus restrictions are starting to damage investor sentiment. US bond yields have fallen 3 basis points since yesterday, while Gold has inched up.
Main Economic Data/Central Banks/Government (All Times GMT)
7:00 a.m.: U.K. Oct. retail sales, public finances
7:00 a.m.: Germany Oct. PPI
8:00 a.m.: ECB’s Lagarde speaks at European Banking Conference
9:00 a.m.: Italy Sept. industrial orders
9:45 a.m.: ECB’s Guindos speaks
1:00 p.m.: ECB’s Weidmann speaks
3:00 p.m.: Euro-Area Nov. consumer confidence
3:15 p.m.: ECB’s Lagarde speaks at Women’s Forum
4:00 p.m.: Russia Oct. retail sales, unemployment