Beyond Currency

"The rumblings that started over the delays at UK ports brought about by Brexit are beginning to get louder as Johnson’s excuse that they are merely teething problems sounds less convincing every day.

The Cabinet Secretary has also attempted to reassure exporters and hauliers in the wake of the fiasco over Brussels attempt to invoke a clause in the Brexit agreement that would have led to a hard border between the Republic of Ireland and the Nationalist North of the island.

It was felt in many areas of business that there would be issues with the agreement, and as time goes on several loopholes and seemingly minor issues are building up.

For example, the EU has now decided that UK shellfish sales are banned because of restrictions on the import of live animals unless they have been through a processing plant that makes the trade non-viable.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Chancellor of the Exchequer Rishi Sunak is preparing to return to the limelight in the coming weeks as both prepares a reboot of the economy and provide further support to those whose jobs have been or are about to be affected by the Pandemic.

He will begin with further support and is being called upon to extend the furlough scheme yet again. With the numbers on furlough now fairly constant, his concern is how many of those currently employed but not working will find themselves out of work when the scheme ends and/or the lockdown is eventually ended.

Sunak will discuss the issue with the Prime Minister and is sure to outline his concern that extending the furlough is pointless if those furloughed have effectively no jobs to return to.

The economic recovery from the Pandemic will provide an opportunity for the Government to invest in retraining. That will shorten both the period people are out of work and go some way towards upskilling the workforce into jobs that will be needed going forward.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"This week’s Bank of England Monetary Policy Committee meeting is unlikely to feature a rate cut into negative territory.

Such a radical move is not warranted currently since it could easily blow up in the face of the bank and exacerbate the economic recovery from the pandemic.

The UK’s post-Brexit trading position is gradually improving although a deal with the U.S. will probably take as long as several market professionals had warned.

There was news over the weekend that the UK is applying to join the Trans-Pacific trade group, consisting of 11 nations including Japan, Australia, Canada, and New Zealand. This would cement relations with several countries in the region although the UK already has trade deals with 7 of the members.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The hospitality sector in the UK is a vital piece of several other parts of the economy and it has been by far the worst affected by the lockdowns that have been off and on over the past year.

There have been criticisms over lack of forward planning and guidance from Westminster and it appears every announcement has contained another issue for this sector.

Supply, staffing, overheads, and forced closures have all led to losses amounting to close to £200 million a day and will contribute to further to a contraction in the economy over the fourth quarter of 2020 and the first of this year.

The Chancellor has been lobbied by several business groups to be made a special case where certain rules have hit them particularly hard but pubs, bars, and restaurants face devastation which will see businesses become unviable with large numbers of staff currently furloughed losing their jobs.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The Prime Minister, under pressure to give the country guidance on when the lockdown may be relaxed, gave a tentative date of March 8th as the earliest date on which schools can reopen. At yesterday's Coronavirus press briefing, Boris Johnson was at pains to point out that this is the earliest date on which restrictions can be reduced and this is by no means certain.

He went on to say that the target date of 15th February for vaccination of the four most vulnerable groups is well on track and if that is achieved then he will provide a more detailed roadmap and timetable for lifting restrictions on February 22nd.

That, he explained, will allow schools the two weeks’ notice that the Education Secretary announced recently, would be provided to allow them the time to be fully prepared.

The inauguration of Joe Biden as U.S. President last week has provided the UK with hope that there will soon be a free trade deal agreed between the two nations. It is hoped that Biden will be pragmatic about the special relationship and encourage the Secretary of Trade to push on with talks.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Over the entire period of the Pandemic, the UK Government has grappled with balancing its effect on the economy with the spread of infections and fatalities.

With deaths attributed to Coronavirus passing 100k yesterday, it is easy to argue that they have not achieved either of their objectives. With deaths lagging infections and hospitalisations, it will still be weeks before any substantial improvement is seen despite the current lockdown and vaccination programme.

At almost every turn, the Prime Minister has been accused of indecision and delay and now appears to have decided to be more cautious, leaning towards ending the pandemic by ensuring that the lockdown remains in place for longer than may be considered necessary once the four most vulnerable groups have been immunised.

The balancing of the two major effects of the Pandemic has not been a unique issue for the UK. All across Europe there has been a similar dilemma with German Chancellor Angela Merkel admitting yesterday that the virus is still out of control.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Today’s employment report is unlikely to make pleasant reading. Forward projections expect the rate to top out close to 7% as the Pandemic will continue to hit business output for several months to come. Today's data is expected to see the rate climb above 5% although the claimant count may fall marginally from November’s high figure of 65k.

This Government, which had been elected barely a single quarter before the Pandemic hit has faced several issues in trying to deal with both the social and economic fallout, has faced the additional irritants of an opposition that has no chance of coming to power for five years questioning and criticizing its actions together with a press that continues to ask questions with no answers.

There are growing demands for the Prime Minister to provide a timetable for the return of children to schools when it was only a month ago the demand was for schools to close.

Health Secretary Nick Hancock at yesterday’s press briefing was bombarded with demands from the media to provide a roadmap out of lockdown. His response was unequivocal in that there will be no change in policy until the four most at risk groups are vaccinated and that programme is on track to be complete by the target date of 15th February.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The UK remains in the midst of the Coronavirus Pandemic, but those businesses that are able to operate are beginning to feel the pinch of how Brexit is changing how business is done between Britain and the mainland.

Boris Johnson won the dubious honour of being the first European Leader to be contacted by the new U.S. President Joe Biden, although it seems that his call did not contain any encouragement for the PM regarding a trade deal between the two countries.

While the Government’s vaccination programme is now generating close to 500k inoculations a day, the Prime Minister and his Health Secretary face several tough questions this week: First, why hasn’t been more done to close the borders sooner? What is the most beneficial period between first and second injections? and how effective is the vaccine against the new strains of the virus?

The Health Secretary admitted yesterday that small numbers of the Brazilian and South African variants are present in the UK.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"London is refusing to recognise the EU’s Ambassador to the UK since the EU is not a Sovereign State as defined by the UN, so its representative does not have the status to present his credentials to the Queen.

The fact that 141 other nations accept the sovereignty of the EU is neither here nor there. A neutral can see both points of view; it is really simply a matter of scoring points and should be resolved over time.

Post Brexit, the UK will take some time to find its feet in trading both with Europe under its new terms and with the wider global market. One positive following the Brexit deal has seen Japanese car manufacturer Nissan commit to the UK. This secures 6k direct jobs and a further 70k in the supply chain.

Progress has been made in trade negotiations with several major economies, but it is how the new U.S. President deals with a new trade deal that is vital to the UK’s short-term prospects.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The Governor of the Bank of England Andrew Bailey followed his Chief Economist Andy Haldane in predicting a robust recovery in the UK economy once the vaccination programme begins to take hold.

Both Bailey and Haldane’s opinions differ from those of the financial markets where analysts see the recovery taking longer than expected and the recession lasting into at least the third quarter.

There are differing opinions too about when the recovery will begin. It is highly likely now that the country will spend the entire first quarter in recession. That means, depending on how quickly activity can grow, the second quarter will begin in recession.

Brexit continues to fly under the radar with yesterday’s report that 20% of small and medium businesses are now avoiding selling in the EU due to uncertainties over delivery. Not generally reported this particularly applies to perishable goods.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.