GBP: Language changes are important

EUR: Single currency on front foot

USD: Waiting ahead of the Fed

Sterling

Positive noises on Brexit continued yesterday with both Brussels and London agreeing that progress had been made towards an agreement. While not much of an indicator, a deal is now the favourite at the bookies having seen no deal go odds on at some points last week, and sterling is starting to price for an agreement too.

Further headlines are due throughout the session, but as long as government continue to no longer refer to No deal as a “strong possibility” or “very likely” and more as “a potential outcome” sterling should stay supported.

The pound has managed to shrug off the news that London and parts of the South East will be in the highest category of Covid precautions by midnight tonight.

Winter was always going to be a tough time for the jobs market and rising jobless claimants, falling employment, and rising redundancies bear that out. Also, the announcement and juxtaposition of the hospitality sector losing the most employees in November the day after London – home to over a quarter of the UK’s total hospitality sector – was put into Tier 3 will be lost on nobody.

Jobs stats are difficult to interpret at the moment given the cryogenic pause that the furlough scheme provides for worker’s wages through the crisis, but today’s figures show that without ongoing support the news from the UK labour market would be nothing short of catastrophic.

Euro

We expect the EUR to remain on the front foot this week as long as we do not get a side swipe from a sub-optimal Brexit outcome.

US dollar

The dollar is very much in ‘wait and see’ mode currently ahead of tomorrow’s Fed decision and with stimulus and Covid-19 case loads rising across the US. Similarly, markets seems unsure whether to stick or twist with even stronger Chinese retail sales and manufacturing data unable to push risk assets higher.

I don’t think this market is exhausted by any stretch of the imagination but will likely need a greater help higher via certainty over stimulus or material benefits from the vaccine rollout.

Empire manufacturing this afternoon could be an interesting piece to watch given the economic importance of New York State and the increasing fears of a further lockdown to prevent further avoidable, Covid-19 deaths.

Elsewhere

One of the risks to our call for the AUD to outperform the majority of G10 currencies next year is a heightening of trade tensions between Australia and China and news overnight has served to underscore the importance of trade link.

Coal is a major export from Australia to China and reports that China is not allowing boats to offload Australian coal is a breach of a number of trade agreements between the two countries. This spat began earlier in the year as China reacted to Australia’s calls for an inquiry into the genesis of the Covid-19 pandemic.

Have a great day.