Morning Report – Monday 21st December

Jon Robson, Head of Trading

“Increasing concerns about the ability to contain rising coronavirus cases globally has provided a catalyst for speculators to transition to safe haven assets. This is providing some short term support to the dollar.”

Main Headlines

A number of EU countries including Germany, Netherlands and Italy have paused travel from the UK after a sharp rise in Coronavirus cases most likely caused by a new strain. The first patient in Italy tested positive for the new variant on Sunday night.

Brexit talks are set to continue today, but a deal is still largely dependent on fishing rights. Brussels said over the weekend that they will not ratify any deal before 1st January, so will have to look at legal stopgap solutions in the mean time.

GBP

The pound is lower against both the euro and dollar in trading this morning. The discovery of a new Covid-19 strain in the UK, as well as no Brexit breakthrough over the weekend has caused Sterling to trade dramatically lower this morning. Negotiators will hope to strike a deal before Christmas, although time is running out.

EUR

The euro is lower against the dollar in early morning trading today. The European Medicines Agency is expected to issue a decision on approval of the Pfizer/ BioNTech vaccine at some point today, while an emergency meeting for all Eurozone countries has been called today to discuss a coordinated response to the new strain.

USD

The dollar is higher against a set of major currencies including the Japanese Yen in trading today. Congress members reportedly agreed a new $900 billion stimulus deal late last night to avoid the midnight deadline, and avoid a partial Government shutdown. Although markets have been waiting on this news for some time, investors are currently more worried about the worsening outlook due to rising Coronavirus cases.

Markets

Global equities are mixed as investors weigh up rising Coronavirus cases and a Brexit impasse against a new stimulus package finally being agreed by US lawmakers. For obvious reasons, this week is a very low key affair for economic data releases with only US jobless claims to look forward to.

Main Economic Data/Central Banks/Government (All times GMT)

7:00 a.m.: Turkey Dec. Consumer Confidence
3:00 p.m.: Euro-Area Dec. Consumer Confidence

European Medicines Agency reviews the Pfizer-BioNTech vaccine