Morning Report – Tuesday 5th January

Main Headlines

Boris Johnson announced at 8pm last night that the UK would be going into another lockdown, which will be more stringent than ‘Lockdown 2’ in November. Schools will remain closed and people are not allowed to leave their house unless they need to.

The Georgia Senate run-offs are today, which could potentially tilt the US Senate in favour of the Democrats and give Joe Biden a blue House and Senate making it easier to pass legislation. However it is likely that Republicans will win in Georgia and retain the Senate.

GBP

The pound is higher against the dollar in trading this morning after falling significantly last night and is mostly unchanged against the euro. The third UK lockdown is set to be economically disastrous but the chief medical officers said that they were not confident that the NHS could survive an increased batch of cases without more stringent restrictions. BoE Governor Bailey is also set to speak to Parliament today about the latest Financial stability report.

EUR

The euro is unchanged against the dollar in early morning trading today. EU Governments are facing pressure to speed up vaccinations as the Covid-19 situation worsens in the continent. Brussels will also look to start to disclose the €750 billion recovery fund in the next few days. There are no major economic releases today, and the Eurozone PMIs came in inline with expectations yesterday morning. German retail sales printed much stronger than expected this morning, up 1.9% vs a forecast of -2% in November.

USD

The dollar is mostly unchanged against a set of major currencies, but is falling against the Japanese Yen in trading this morning. The variant strain discovered in the UK has been found in New York State for the first time, which could lead to more stringent restrictions under new President Joe Biden. The dollar is tentative ahead of the Georgia state run-off election which could determine how much President Biden can achieve in his first two years of Presidency.

Markets

Global equities including Asian markets and US futures edged up this morning after falling significantly yesterday as the Covid-19 situation worsened and Boris Johnson announced that the UK would go into a full lockdown. Oil prices and bond yields have fallen, while Bitcoin declined over 10 percent from its peak of $34,000 yesterday.