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Risk off
Fishing for a deal
The pound slumped again in London and New York trading on Tuesday, after the EU rejected the UK's latest offer on fisheries and another lockdown in the New Year becomes ever more likely. The highest November Government borrowing figure ever recorded added fuel to the fire, as sterling lost an average value of 0.4% against European and North American counterparts. Overnight we've seen a part-recovery and today GBP will once again hope for traders to 'buy on the rumour' of any Brexit breakthrough for support.
On a Brexit deal, Michel Barnier reportedly told Ambassadors that the latest UK offer had still been "totally unacceptable". On the record there was nothing new, as not for the first time he reminded everyone that we are in a "crucial moment" that required a "final push".
EUR/USD lost 0.7%, as the euro also came under Brexit and new Covid variant pressure. The Australian and Kiwi dollars were the two other worst performers, fairing just as badly as GBP. Mounting concerns of another disruption to the global supply chain and a loss of market optimism is hurting both.
Congress Trumped again
The Greenback was head of the class again, with the Dollar Price Index hitting its highest level in a week. JPY and CHF occupied the other two podium positions, as appetite for currency risk continued to evaporate.
However, Wednesday's Asian session has seen a dollar pullback, after Donald Trump voiced his disapproval at many parts of the Congress-back Covid relief bill; insisting the one-off payments to Americans be increased from $600 to $2000. The outgoing President made on-brand disparaging remarks about foreign countries included in the support package and suggested he will not sign the bill unless "substantial changes" are made. The video message sent shockwaves through Washington, as its passing is attached to a larger funding commitment that keeps the US Government open past next Monday.
US data had quieter alarm bells attached, as The Conference Board's Consumer Confidence dropped to 88.6 in November, missing estimates as coronavirus accelerates its impact on lives and livelihoods. November's Existing Homes Sales slipped to 6.69M, and although Q3 GDP was adjusted slightly up, to 33.4% (annualised), fuelled by $3trillion in Covid relief, that still reflects an economy 3.4% lower than this time a year ago.
One roadblock removed
On Tuesday evening, news broke that the UK and France had reached an agreement allowing their shared border to reopen today. The French agreed to compromise on the demand that all cross-border entrants must provide a PCR test result. Instead, lateral flow tests that can return a positive or negative within 30 minutes will be used. The army are being deployed to the departure points in order to meet demand. Great news for the 3,000 lorry drivers currently left stranded; but whether congestion will ease enough for all to be back home by the 25th remains uncertain.
The European Commission had earlier encouraged its member states to reopen their borders to all "essential travel and transit" with the UK, for fear the entire continent's supply chain will be impacted by the near-blanket exclusion.
Today the main data comes from the United States, as we get the latest release for core durable goods, weekly unemployment claims, new home sales, consumer sentiment and inflation expectations. Canadian monthly GDP is released earlier than usual to accommodate Christmas. How thoughtful.
GBP: November borrowing the worst on record
USD: Unemployment claims set to climb
CAD: Monthly GDP today
CHF: Continue to gain on flight from risk
JPY: Ditto
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