Sunak revamps support… Again
23rd October: Highlights
- Rishi Rides Again
- Trump and Biden slug it out
- Fragile economy facing make or break winter
Rethink supported but cost a burden for the future
The move was largely welcomed on all sides although the Parliamentary Opposition believe that it is too little too late.
In a press conference also attended by the Prime Minister and Chief Medical Officer, Sunak supported the practice of regional lockdowns despite criticism from various sections of the media.
The rising level of cases has led to extraordinary pressure on the Governments track and trace system. The number of new cases means that it is almost impossible for a manually driven system to keep up.
With time running out to find a solution to the issues facing the UK and EU over Brexit, the negotiators are getting down to business in what appears on the surface to be a more practical atmosphere. Although it makes negotiations more convivial to confirm what they agree on, the hard yards still need work and compromise will be necessary.
Whisper it softly, but there was also a rumour of an extension to the December 31st expiry of the adjustment period. The question has been asked, would it be better to extend the period, rather than both sides simply walking away?
It is hard to see Boris Johnson agreeing to such a move since it would damage his credibility given his belligerent tactics to try to drive a deal. That having been said, industries affected by Brexit who have direct relationships with Brussels would probably favour the prospect of an agreement even if it did extend the period of uncertainty.
The orders section of the CBI’s Distributive Trades Survey showed a great improvement in October so far. Although it is still in negative territory, it improved from -48% to -34%. This is still well below pre-March levels but points to a gradual improvement which cannot be harmed by the provision of greater support.
The pound reacted poorly to the news of the extra support with traders and analysts concerned at the country’s debt to GDP ratio reaching 100. It fell back to a low of 1.3082 but remains comfortably above the support at 1.3020.
Improving employment data provides relief
The threat of the mute button appeared to have the desired effect on President Trump who made the whiff of scandal around Biden’s son’s business dealings when his father was Vice-President his focus.
Biden countered with questions about Trump’s opaque tax returns, but it was around Covid-19 that sparks mostly flew. Biden laid the blame for 220k+ fatalities at Trump’s door and agreed with the moderator that a further lockdown may be needed as new cases soar.
Trump disagreed vehemently commenting that now is the time to reopen the country for business.
Despite the threat of being muted, there were still plenty of barbs thrown in both directions and the moderator received compliments from news media sources for her handling of both men.
The weekly employment statistics for the w/e 16th October are at last improving in unison. Initial claims fell to 787k from 842k while continuing claims fell to 8,373k from 9,397k.
The economy is still facing a tough time with a Support Bill no nearer agreement and new cases on 22.10 reaching almost 80k with close to a thousand deaths.
While the Fed. has ensured that liquidity is plentiful and banks are able to lend with very few restrictions, the lack of a support bill and the possibility that one will now be in place before the election now almost non-existent, this puts the stuttering recovery further at risk.
The dollar index moved away from support at 92.20 yesterday, reaching a high of 92.97 and overnight has erased its losses from Wednesday.
Eurozone cannot remain in its present form
With Brussels now having tacitly done away with its budget deficit rules and certain individual economies likely to continue to suffer for far longer than is expected for the entire region overall, it will be the ideal time for the ball to start rolling.
Politically, the two most influential leaders who are positive to closer union, Angela Merkel and Emmanuel Macron may both no longer be on the scene. Merkel will have stood down while Macron could face a tough time depending on the outcome of Brexit negotiations.
He is running neck and neck with right-wing candidate Marine le Pen with both currently polling 25%, well ahead of any other potential candidates for the 2022 Presidential election. France could easily lurch to the right given the criticism of Macron’s handling of the second wave where he has appeared indecisive.
It is almost certain that France will still be in the grip of Covid-19 when the vote takes place, economically if not medically.
Today, data will be released for manufacturing and services output across the entire region. Composite data is expected to fall back below the 50 level with both components weakening slightly and services remaining well below the 50 level.
The euro is struggling to sustain its rise above the 1.18 level versus the dollar and fell to a low of 1.1811, closing at 1.1818 yesterday and remains under pressure.
About Alan Hill
Alan has been involved in the FX market for more than 25 years and brings a wealth of experience to his content. His knowledge has been gained while trading through some of the most volatile periods of recent history. His commentary relies on an understanding of past events and how they will affect future market performance.”