Morning Report – Thursday 26th November

Jon Robson, Head of Trading – “Once again the greenback is under pressure against most major currencies and we are close to levels not seen since early September in the Dollar Index. Recently, buyers of the dollar have appeared around these levels however, it remains to be seen whether the dollar can continue to be supported in this risk on environment.”

Main Headlines

Rishi Sunak confirmed that borrowing will hit a peacetime record of £394 billion in the Spending Review yesterday. The chancellor said that “the economic emergency has only just begun”, and the OBR predict that the fiscal deficit will remain as high as £30 billion by the middle of the decade.

On the Brexit front, generally no news is good news but with time running out for a deal, Europe’s financial sector is increasingly worried that no progress has been made. Ursula Von der Leyen said yesterday that it was still impossible to predict whether a deal will be struck.

GBP

The pound is unchanged against the dollar, but losing ground against the euro in trading this morning. Rishi Sunak’s cut to foreign aid has caused rifts in the Conservative Party, with even David Cameron emerging from the shadows to have his say on the matter. This spells trouble for Boris Johnson, who is struggling to get MPs on side at a time where he needs support on Brexit.

EUR

The euro is slightly higher against the dollar in early morning trading. Germany is set to extend its lockdown to 20th December as coronavirus data coming out of the country seems to show that stringent restrictions are working. There are a host of ECB speakers set to talk today including Chief Economist Phillip Lane, who speaks just before ECB minutes for October are released. They are unlikely to be of much use as they paint an economic picture before the positive vaccine news.

USD

The dollar is lower against a set of major currencies including the Japanese Yen. Today is Thanksgiving in the US and so there is no economic data to report and markets are closed. US initial jobless claims unexpectedly rose last week to 778,000 which is worrying as it is likely that Coronavirus restrictions are likely to get worse, as US Covid-19 deaths was more than 2,000 yesterday. FOMC minutes also showed that some kind of monetary action in December is likely, although the minutes are unsurprisingly cryptic.

Markets

Markets were subdued yesterday in the lead up to Thanksgiving and investors are taking stock after record highs on Monday. Bonds continue to climb and Oil has recouped a significant proportion of its losses inflicted by the pandemic. Very little movement in markets are expected today due to the US holiday, although Asian equities have started off strongly.

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

7:00 a.m.: Germany Dec. Consumer Confidence
7:45 a.m.: France Nov. Consumer Confidence
8:30 a.m.: Riksbank Rate Decision
9:00 a.m.: Euro-Area Oct. M3 Money Supply
12:00 p.m.: ECB’s Lane speaks
12.30 p.m.: ECB October Minutes
1:00 p.m.: ECB’s Schnabel speaks

U.S. markets closed for Thanksgiving holiday