Currency Note

Rise in redundancy as vaccine offers strong hopes

By Christopher Nye November 10th, 2020

A day of good news yesterday has been tempered this morning by a record rise in redundancies in the three months to the end of September.

We heard yesterday that a Covid-19 vaccine with more than 90% efficacy should be available within weeks, while rapid airport testing could reduce quarantine periods as early as December.

Stock markets leapt at the news, with the owner of British Airways, IAG, rising 40%, Carnival Cruises up 39%, Expedia up 25% and the Cineworld cinema chain up 50%.

The need for a vaccine was made clear this morning with news from the ONS that employment in the UK fell by 247,000 in Q3.

News from the Brexit talks is that negotiations are continuing and while sticking points remain on key issues, civil servants are quietly writing out the agreements that have been already made, in preparation for publication.

The Government’s controversial Internal Markets Bill, which attempts to overrule parts of the Withdrawal Agreement, was defeated in the House of Lords.

In the US, President Elect Biden’s transition team has started work, even as the Trump team claim to be preparing lawsuits alleging voter fraud.

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GBP: Pound strengthens on vaccine and Brexit hopes

Sterling strengthened by around 1% across the course of yesterday against EUR. It remained broadly stable against USD but did briefly hit a new two-month high.

This was partly due to the vaccine news and partly down to hints from the UK Environment Secretary of a potential deal on fisheries with the EU.

This morning we have already heard that unemployment in the three months to September was 4.8%. This is in line with expectations, but above the 4.5% in the previous period. There were 247,000 fewer people in work.

However, it is not so far above the 3.9% rate of this time last year, before Covid. The Chancellor’s furlough scheme was due to end in October, meaning that many staff were laid off. However, it has now been extended to the end of March 2021.

On Thursday we have GDP for Q3 along with a mass of other industrial and economic data, as well as a speech by Bank of England governor Andrew Bailey, that could indicate a direction in monetary policy.

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EUR: March against USD pegged back

Although the Euro has strengthened against USD by nearly 3% over the week the advance was pegged back slightly yesterday, as the election result hit the markets.

ECB chief Christine Lagarde made a speech yesterday but made no mention of monetary policy. She has another speech scheduled for tomorrow.

Today we have ZEW economic sentiment mid-morning, and inflation rates in Germany on Thursday. More likely to move the market is EU GDP on Friday.

USD: Quiet midweek as US marks Veterans’ Day

The dollar strengthened against the euro yesterday, although it failed to recover its losses from last week.

It’s a relatively quiet couple of days in the US, with a federal holiday for Veterans’ Day tomorrow.

However, it picks up on Thursday with jobless claims which are expected to fall to 738,000, from 787,000 and the consumer Price Index which is also expected to fall slightly.

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