Beyond Currency

"The UK got a glimpse of the shape of things to come yesterday as data was released that showed that the country shed close to 700k jobs in the three months to May.

With the spate of major retailers and High Street stores closing premises permanently and several large firms saying they won’t take up the Government's job retention scheme, the situation can only get worse going forward."

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.

"China responded to the UK’s decision to end using equipment produced by Huawei in its 5G network exactly as the Government will have expected.

The calculated risk taken by Boris Johnson may have stoked the importance of the Special Relationship, but it has put in jeopardy Chinese investment in the UK.

A spokesperson for Beijing voiced its disappointment with the British decision which it said raised questions over the security of Chinese investment in the UK which last year totalled in excess of £50 billion."

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 stoked the fires of growing enmity with Beijing yesterday as it announced that it will cease with immediate effect using any equipment produced by Chinese tech giant Huawei in its 5G network.

Already embroiled in a dispute over Chinese actions in Hong Kong, the UK Government bowed to significant pressure being exerted by Washington to both stop working with Huawei immediately and remove all its kit from the network by 2027."

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 services sector in the UK spans many segments of ordinary life. It has been the most widely hit by the furlough of staff and will see the largest share of job losses, as befits its status as the largest part of the UK economy.

An example of this is the travel industry where nine of every ten businesses are facing significant job losses. This is created by the knock-on effect across the entire sector that has seen airlines making staff redundant, hotels and restaurants struggling to make the new social distancing measures viable and quarantine measures (now relaxed) forcing holidaymakers to stay home."

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 torrent of unemployed workers could reach three million which would put it in line with the seventies and eighties although at least then, the country was going through a major realignment. At that time, the mines were on their last legs and vehicle manufacturing was becoming a niche rather than prime industry.

What the UK could see in coming months may be beyond the wit of any Government to deal with and no amount of cut-price meals or other freebies will even scratch the surface.

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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 fallout from Brexit, particularly if the UK departs without a deal over trade and the future relationship, seems to have been a factor so long that its significance has been dulled. But while the pandemic is by far the biggest concern for the economy going forward, the effect of a no-deal Brexit could last longer.

While Rishi Sunak’s package of measures to move from shock treatment for the economy to long-term plans to stimulate growth were well received on the whole, the cost of ensuring unemployment doesn’t spiral out of control is being questioned. Sunak had little option but to act but opposition Parties are already labelling the measures as frivolous in some cases and too little too late in others."

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.

"Sunak’s plans contain some innovative ideas, not least of all the half price meal deal, but they also contain an element of kicking the can down the road which is understandable as he doesn’t have an unlimited money tree. A reduction in VAT has been warmly received but as is usual where a degree of relief is offered, more would have been more welcome.

The overall financial cost of the Covid-19 Pandemic to the UK will be in excess of £300 billion and it will take some further, less palatable decisions for Sunak to be able to balance the books. He may be left with the stark choice of cuts to services or tax increases in the winter or early next year although Johnson has already ring-fenced the health and care sector as being virtually untouchable.

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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.

"While the Prime Minister is painting with broad brush strokes, Sunak will be expected to put some flesh on the bones of his plans. Johnson spoke recently of kickstarting the economy by investing in infrastructure, but Sunak’s approach will more likely provide real assistance to those either out of work or facing redundancy.

There have been some positive whispers from both sides about a degree of progress having been made in the negotiations over the UK’s relationship with Brussels once Brexit takes place at the end of the year. While there is never any official statement over how the talks are developing or where the difficulties lie, rumour will continue to drive the market.

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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.

"There is a radical economic theory that has been tested in a few economies that Chancellor Rishi Sunak is rumoured to favour as he looks to innovate to help the UK recover from the worst effects of the Covid-19 pandemic.

It is believed that the most effective way to get an economy moving is the shock treatment of placing cash in the hands of the population with the instruction to spend spend spend. This resembles the Helicopter Money theory championed by former Fed. Chairman Ben Bernanke.

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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 nation will have to wait for a couple of weeks to see if there has been any major fallout from the opening of the hospitality sector on Saturday, in terms of fresh Covid-19 infections.

The effect of social distancing in restaurants in particular is yet to be seen on their ability to generate sufficient cashflow to stay afloat. Furthermore, any return to lockdown due to a spike in Covid-19 cases could create a catastrophe for the sector.

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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.