The pound weakened against the euro and the dollar overnight but has found some support this morning. Brexit, COVID-19 and news about the UK economy continue to impact sterling’s movements.
The EU summit will take place next week, which is the current deadline for the EU and the UK to agree on a trade deal. So far, progress looks uncertain and whilst the government has said that talks are in the ‘final stage’, gaps remain on key issues, such as fishing rights.
In an unexpected turn of events, the Prime Minister’s chief advisor and the creator of the Vote Leave campaign, Dominic Cummings, announced his resignation last night. Boris Johnson’s aide and former Vote Leave official, Lee Cain, has also resigned.
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GBP: Brexit concerns impact pound
The pound weakened overnight but has found some support this morning against both the euro and the dollar. The departure of two hard-line Brexiteers, Dominic Cummings and Lee Cain, from Prime Minister Boris Johnson’s inner circle could suggest that the UK are less likely to pursue a ‘no trade deal’ Brexit at the end of this year.
Despite news that the UK economy made a partial recovery between July and September, the pound weakened yesterday as the recovery missed expectations. The economy was predicted to recover by 15.8% but managed to grow by 15.5%. Year-on-year, the economy shrank by 9.6%.
Concerns over the progress of Brexit talks also weakened the pound, with sources reportedly saying that time is running very short to agree a deal. It’s hoped that a deal can be reached before the EU summit next week.
EUR: Virus cases still rising in Europe
Data released yesterday shows that Eurozone industrial production dropped 6.8% year-on-year and 0.4% month-on-month, missing expectations of a 0.7% increase. The steepest monthly declines were in Italy, Ireland and Portugal, whilst the bloc’s largest economies, Germany and France, recorded increases.
Virus cases are still rising across Europe, with Germany cutting their growth outlook for 2021. Earlier this week, President of the ECB, Christine Lagarde, hinted that there would be further easing to support the European economy. The ECB are expected to reveal changes to their monetary policy in their December meeting.
USD: Positive jobless claims figures for US
The dollar is slightly weaker this morning, however it’s thought that rising infection rates will keep it buoyant. The contrast between vaccine hopes and rising infection rates could continue to impact the dollar.
Jobless claims figures for the US were released yesterday, with the 4 week moving average showing that claims dropped to 755.25 thousand in the week ending November 7th, the lowest level since the negative effects of the coronavirus pandemic started to be felt in late March.
Today, consumer sentiment figures will be released from the US and there will be speeches from two Federal Reserve officials.