Morning Report – Friday 11th December

Jon Robson, Head of Trading

“Sterling has remained buoyant despite a number of negative Brexit comments. The focus is now on Sunday’s deadline, we expect significant volatility next week.”

Main Headlines

Boris Johnson has said there is a “strong possibility” of a no deal Brexit as the main issue of the EU retaining the right to impose punitive tariffs on the UK was described as an unacceptable attack on UK sovereignty. A deal can still be salvaged and it is worth noting that this could amount to political posturing as the PM looks more successful if those concessions are made.

Coronavirus deaths in the US topped 3,000 for the second consecutive day, as the country is struggling from the fallout of Thanksgiving travelling. US experts have recommended that the FDA grant the Pfizer/ BioNTech vaccine emergency authorisation.

GBP

The pound is higher against both the euro and dollar this morning. Brexit talks looked to have stalled with the EU and according to one EU source, the bloc has mentally moved on, and it would take an intervention from Macron or Merkel to save the day. In other news, Britain looks to have finalised a trade agreement with Vietnam, while talks with Canada have hit a delay.

EUR

The euro is unchanged against the dollar in early morning trading today. The ECB decided to keep its bank rate unchanged and increased PEPP by €500 billion as expected, and so had little impact on the currency market. The EU council meeting finishes today, and will end on a positive note as EU leaders managed to get Hungary and Poland on side to finalise the $2.2 trillion budget and stimulus package.

USD

The dollar is unchanged against most major currencies including the Japanese Yen in trading this morning. Nancy Pelosi said there was progress on fiscal stimulus talks, which is eerily reminiscent of the words and no action of the House before the election. The Senate closes for Christmas and new year in 7 days and it is therefore unlikely a bill can be tabled, debated and passed in that time.

Markets

Global equities are mixed as investors weighed up disappointing US jobs data with the fading prospects of a fiscal stimulus deal. S&P 500 futures have slipped slightly as investors take a pause, while Asian equities are enjoying some gains. Bond yields held yesterday’s gains, while Oil prices ticked upwards, and Brent Crude Oil hit $50/ barrel for the first time in nearly 2 years.

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

7:00 a.m.: Turkey Oct. Current Account
7:00 a.m.: Germany Nov. CPI
7:00 a.m.: BOE publishes financial stability report
7:30 a.m.: Bundesbank publishes economic forecasts
8:00 a.m.: Spain Nov. CPI
9:00 a.m.: Italy Oct. Industrial Production
9:00 a.m.: ECB’s Holzmann speaks
10:00 a.m.: Italy 3Q Unemployment
1:00 p.m.: Russia Oct. Trade
3:00 p.m.: ECB’s de Cos speaks
4:00 p.m.: Russia 3Q GDP
6:00 p.m.: U.S. Baker Hughes Rig Count

Spain, Switzerland sovereign debt rated by Fitch; U.K. rated by DBRS