Morning Report – Thursday 19th November

Jon Robson, Head of Trading – “It is extremely positive for the UK that they have been able to negotiate trade deals so swiftly with Japan, and now Canada. Negotiations are taking place with the US, Australia and New Zealand, which if agreed, will give further support to Sterling in the long term.”

Main Headlines

US Coronavirus deaths rose by the most in six months yesterday, as the death toll neared 250,000. New York City took the unprecedented step to shut schools which were only reopened in September. Public officials are nervous that the Thanksgiving holiday, only a week away, could be like a ‘mini Christmas’ and accelerate the rapid spread of the virus as families meet from all over the country. Now that New York has taken the first step, it could lead to other cities following suit.

Rishi Sunak is set to reveal a “scary” outlook for the UK economy. The OBR predict that GDP could fall by close to 11 percent in 2020, the worst annual performance in more than 300 years, before Scotland had unified with England. The Government has recently come into criticism for their loose fiscal policy during the outbreak of the pandemic, but these figures could benefit the Prime Minister who can use this as a reason to boost infrastructure spending.

Pfizer and BioNTech will submit their vaccine for US and EU “emergency approval” as new data showed that the efficacy rate was better, at 95 percent, than first thought and statistically similar to Moderna’s vaccine which had an efficacy rate of 94.5 percent. Phase 3 trials had a global sample size of 43,000 and crucially had a similar level of efficacy rate for people above the age of 65.

GBP

The pound is falling slightly against both the euro and dollar in early trading this morning. The UK and Canada are close to agreeing a post-Brexit trade deal according to a close source, which would come into effect on 1st January. The same can be said with Brexit talks themselves, where Michel Barnier is set speak to EU officials on Friday. Sterling has begun to price in a trade deal, and if Barnier’s comments are perceived as negative then there is scope for the pound to fall.

EUR

The euro is rising against the dollar in early morning trading today. EU leaders have a virtual summit today and the main focus on the agenda is getting both Hungary and Poland onside to agree to the heavily awaited pandemic relief fund which makes US stimulus negotiations look like family bickering in comparison. Lagarde is set to speak again today four separate times and will most likely talk about nothing of note in any of her speeches.

USD

The dollar is trading slightly higher against most major currencies this morning although the Japanese Yen is mostly unchanged. Joe Biden is nearer to officially claiming the Presidency as Georgia is close to certifying the election results on Friday with Michigan, Pennsylvania and Nevada expected to follow next week.

Markets

Global equities were brought back down to earth from daydreaming about a successful vaccine rollout in 2021 to the grim outlook of the economy today, as the US hit a chilling milestone of 250,000 deaths and New York City closed schools. The S&P 500 was hit the hardest and dropped 1.16% yesterday. Gold continues to slide to its lowest level in a week, while Oil is unchanged.

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

8:00 a.m.: ECB’s Lagarde in European Parliament hearing
9:00 a.m.: ECB, Italy Sept. Current Account
10:00 a.m.: Euro-Area Sept. Construction Output
11:00 a.m.: Turkey Rate Decision
1:30 p.m.: U.S. Initial Jobless Claims
3:00 p.m.: ECB’s Lagarde, de Cos, Villeroy speak at separate events
4:00 p.m.: ECB’s Schnabel speaks
EU leaders hold summit
South Africa Rate Decision