Morning Report – Thursday 10th December

Jon Robson, Head of Trading

“Once again, Brexit talks have been extended until Sunday. With time running out, the delay in getting an agreement in place is leaving sterling vulnerable.”

Main Headlines

The ‘dinner date’ between Boris Johnson and Ursula Von der Leyen ended with both agreeing to a ‘firm decision’ by Sunday. Johnson set out his red lines and said the UK would never budge on “automatic” trade sanctions in a nod to appeasing the US.

Two medical staff who took the vaccine on Tuesday have reportedly had a severe allergic reaction, and as a result, medical regulators have advised individuals with a history of allergies to not take the Pfizer/ BioNTech vaccine.

GBP

The pound is lower against both the euro and dollar this morning. Uncertainty around Brexit talks impacted sterling and despite a three hour dinner of scallops, there was no breakthrough on fisheries. Barnier and Frost will continue negotiations until Sunday, but today will likely be a quiet day as both sides take stock of their negotiating positions.

EUR

The euro is higher against the dollar in early morning trading. The EU Council meeting starts today, and Brexit will take a back seat as the pressing issue of agreeing the next budget along with the €1.8 trillion recovery package will take precedence. The ECB’s rate decision is also due today and the expectation is that the bank rate will be unchanged, but the central bank will increase quantitative easing measures.

USD

The dollar is mostly unchanged against a set of major currencies but is higher against the Japanese Yen. Steve Mnuchin and Nancy Pelosi are confident that a US stimulus deal could be agreed but there are divergences in state and local aid. Senators will likely pass a one-week stopgap spending bill to avoid a Government shutdown heading into the new year.

Markets

US tech stocks and another impasse over US fiscal stimulus dragged global equities down. Investors have concluded that the White House administration have entered into the fiscal relief package charade, which was seen before the election and it will be a while yet until a deal is agreed. Treasury yields fell amid the uncertainty, while oil prices ticked higher.

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

7:00 a.m.: U.K. Oct. GDP, Industrial, Manufacturing Production, Trade
7:45 a.m.: France Oct. Industrial Production
8:30 a.m.: Sweden Nov. CPI
9:45 a.m.: Spain sells bonds
10:00 a.m.: Italy sells bonds
12:00 p.m.: Ukraine Rate Decision
12:45 p.m.: ECB Rate Decision
1:30 p.m.: ECB’s Lagarde speaks
1:30 p.m.: U.S. Initial Jobless Claims, Nov. CPI
5:00 p.m.: USDA WASDE Report

EU leaders summit