Morning Report – Friday 4th December

Jon Robson, Head of Trading

“The dollar is on the ropes. Although we may see some profit taking going into the weekend, given recent moves into new trading ranges, the sell off is likely to resume next week.”

Main Headlines

The EU Budget commissioner, Johannes Hahn announced he was willing to cut Hungary and Poland out of the EU recovery package if they continue to block the project. The €750 billion recovery fund has been negotiated on since July, and finally looks to be in the final stages.

Brexit talks, which many believed were only 24 hours from completion, went poorly yesterday as the UK accused France of making new demands at the “eleventh hour”. Macron, and his political career, depends on getting a good deal for fisheries in Northern France and he is proving to be a difficult negotiator.

GBP

The pound is unchanged against the euro and dollar in early morning trading today. Michel Barnier has returned to the continent after talks went awry yesterday. The earliest opportunity for a deal in principle has now been pushed back to Sunday, although the EU remains adamant the internal market bill must be scrapped by the House of Commons on Monday. Construction PMIs are released today but will be of little use to Sterling, its main concern is Brexit discussions and Brexit discussions only.

EUR

The euro is higher against the dollar in trading this morning. Manufacturing data in the continent for October surprised to the upside yesterday, especially in Germany where factory order growth accelerated 1.5%. This is of little use to investors who know that this will decline rapidly in November due to lockdowns across Europe.

USD

The dollar continued its decline yesterday against a set of major currencies, although it is unchanged against the Japanese Yen. The bipartisan stimulus bill supported by Nancy Pelosi, is getting significant Republican backing including senior Senators in Lindsey Graham and Mitt Romney. McConnell is yet to add his support, but his hand may be forced by Senators who want a deal quickly. The US Jobs Report is released today, and will likely show an increase employment, but this could be short-lived as restrictions in the US are set to increase.

Markets

Global stocks are mixed this morning as the world awaits important developments over Brexit, vaccines and key data from the US labour market. The S&P 500 is slightly higher while European indexes are lower. Bond yields are mostly unchanged but Oil prices increased its gains over the past week as the OPEC+ meeting finished with a positive agreement to ease its output cuts more gradually than originally planned.

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

7:00 a.m.: Germany Oct. Factory Orders
8:30 a.m.: Germany Nov. Construction PMI
9:00 a.m.: Italy Oct. Retail Sales
9:30 a.m.: U.K. Construction PMI
9:30 a.m.: BOE’s Saunders speaks
10:00 a.m.: Greece 3Q GDP
11:00 p.m.: U.K. sells bills
1:30 p.m.: U.S. Jobs Report
1:45 p.m.: BOE’s Tenreyro speaks
4:00 p.m.: Russia Nov. CPI

Russia, Turkey sovereign debt rated by Moody’s; Italy rated by Fitch; Germany rated by DBRS