Beyond Currency

"The spread of Coronavirus in England that has led to a new national lockdown has increased to such an extent that one in fifty is now infected.

With new cases of the virus reaching more than 60k for the first time yesterday, there was little obstruction when the Bill to make regulations law was passed in Parliament last evening.

As the latest restrictions take hold, a further significant fall in economic output is likely. Another recession beckons and Chancellor Rishi Sunak allocated a further four billion pounds in grants to those most affected yesterday.

The official definition of a recession is where two consecutive quarters suffer a contraction of GDP is likely to be fulfilled with Q4 ‘20 and Q1 ‘21 seeing falling growth.

"

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.

"Prime Minister Boris Johnson announced last evening that he had made the decision to place the entire country into full lockdown as cases of the variant of Covid-19 spread unchecked.

In an effort to wrest back control Johnson announced that from midnight last night, everyone should stay indoors unless any trip was essential.

It was a day of contrasts as the Oxford/AstraZeneca vaccine began to be given.

Following the announcement of the lockdown, it appears that the Government is pinning its hopes upon the delivery of the vaccines to conquer the pandemic.

Given what happened to the economy during the first lockdown which started in March of last year, it is vital that the new measures not only work but work quickly. Chancellor Rishi Sunak has already extended the Government’s furlough scheme until the end of April, but he is bound to face pressure to put other regional and/or industry specific measures in place.

"

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.

"With Brexit now completed, there has been a positive start to the movement of goods between the UK and EU from both sides of the country.

The New Year holiday has allowed freight businesses to ease themselves into the new methodology and so far, the reaction has been positive.

Given the concerns over what would happen in the event of a no deal scenario, the UK can look forward to its new trading relationship with Brussels with a degree of confidence.

Remain supporters can now be seen as having ideological rather than practical concerns although there is still time for problems to surface.

"

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.

"Strong rumours of a breakthrough in talks between London and Brussels have emerged overnight with an announcement of a Brexit trade deal possible this morning.

The UK had been facing the twin threats of its own isolation due to the rapid spread of the new strain of Coronavirus and the possibility of chaos at UK ports should no deal be agreed.

Those two issues appeared to have melded into one as France banned freight services between the two countries bringing chaos to the south east of the UK.

In further good news, France has eased restrictions overnight with the military being drafted in to assist with mass testing for lorry drivers.

In what was being labelled a dry run for a no deal Brexit, queues of lorries stretched for miles as with drivers rapidly running out of food and drink and comestible cargoes beginning to spoil."

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 chances of the UK escaping an economic contraction in Q1 are fading fast.

Prime Minister Boris Johnson finally acted on Saturday to tighten Covid limitations. He created a new tier four in which he changed the relaxation of restrictions for Christmas.

In the south east of the country restrictions will not be lifted at all while in other areas the Christmas relaxation has been reduced from five days to Christmas Day only.

Tier Four is a further blow to the retail and hospitality sectors as all non-essential shops will have to close and the traditional Post-Christmas Sales will now be cancelled.

With restrictions likely to stay in force well into the New Year, the prospects for the economy have become severe.

"

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.

"Brexit is still just ahead of Coronavirus on the list of short-term drivers for both the economy and the pound.

Johnson and von der Leyen had yet another phone conversation last evening and according to Michel Barnier, a deal is still possible by tomorrow with ratification by the EU Commission on Sunday. That view is countered by UK Government Minister Michael Gove who commented yesterday that he believes the chances of a deal are less than 50%.

The review of the lockdown tiers has been carried out and Health Secretary Matt Hancock announced yesterday that only very minor positive moves from tier three to tier two would take place. Having placed London in tier three earlier in the week, several other areas of the South East of the country were moved up to tier three.

It is therefore slightly incongruous that Westminster and the three devolved administrations have agreed to leave the relaxation of restrictions over the Christmas Holiday in place with just a request that people behave sensibly."

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.

"If the UK economy can grow in the current environment 2021 should be a piece of cake! The IHS Markit Economic Survey grew marginally in this month from 49 to 50.7. That rise, more importantly, took output into expansion territory.

As the month has worn on, problems with freight services have led to issues in the supply chain. This can only worsen as the outcome of Brexit negotiations becomes known.

Unless the EU totally capitulates and gives the UK all it wants in talks, the situation post January 1st is certain to be worse than it is today.

No matter what procedures are set in place, documentary requirements, more customs checks and additional permits for UK lorries to travel unfettered across Europe will come into force. Brussels has suspended the need for new permits for lorries until June, but there will be issues over the use of the correct containers.

"

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.

"A word that has disappeared from Brexit talks since Johnson took over from May is fudge. The forthright approach used by Johnson during a year of sometimes intense negotiation persuaded commentators that he was prepared to simply walk away.

However, over the past few weeks the deal has become everyone’s focus on both teams as they have allowed several deadlines to come and go.

It has taken an inordinate time for the penny to drop with both sides. The rhetoric and sabre rattling have been replaced by a more considered approach.

However, as time runs out it is becoming more and more probable that an agreement, if one is reached, will prove to be unattractive to both sides leaving the entire divorce process in a mess and adding to the level of uncertainty that already exists.

Officially, and according to the UK Prime Minister’s Office, no deal remains the most likely outcome, but acceptance of such comments is becoming thinner and thinner.

"

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 EU and UK representatives negotiating a post-Brexit trade deal have been told by their respective leaders to continue talking despite the comments made by both sides at the end of last week that agreement is unlikely to be achieved.

With the UK’s transition period ending on December 31st, it is hard to imagine the three remaining issues being resolved. Despite the deeply rooted intransigence of both sides, they both now understand that a deal is preferable but the rhetoric about being prepared to walk away remains.

In a joint statement released yesterday, Johnson and von der Leyen did not say how long talks would continue for but there seems to be a growing realisation of what no deal actually means even at this late stage, and a desperation to get an agreement is growing.

The Pound has rallied overnight as traders optimism in a deal being done was renewed.

"

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.

"It is inconceivable that the UK and EU after spending so much time negotiating first a withdrawal agreement, then a trade deal and post-Brexit relationship find themselves two days away from disaster.

The degree of chaos that Brexit is going to bring to the logistics sector of the UK economy is already evident. In the south east of the country roads are already becoming clogged with lorries waiting to cross the channel while in several ports, there is a logjam developing with containers unable to be cleared through customs.

The issues in the ports are not just about Brexit, Covid has played a part as has an issue that has been developing for months with goods arriving from China. However, the country is experiencing the beginning of a living nightmare that will become reality in just three weeks.

There remains confusion about the paperwork that is necessary and there is the potential for 100km queues clogging roads in Kent as the full effect of Brexit is felt.

"

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.