Johnson bullish on vaccinations
Morning mid-market rates – The majors
8th January: Highlights
- Better preparation means effect of lockdown to be less severe
- Fallout from from Capitol riot continues
- Retail sales badly hit by lockdowns
Things will look very different by spring
The plan to vaccinate all four of the most vulnerable groups is being supported by the army’s logistics division and Johnson explained that the only limit to the rapid deployment of the vaccine is supply.
A report issued yesterday by a major European Bank concluded that the country’s GDP will take a less significant hit from the latest lockdown as business knows what to expect, has been able to prepare and the Government’s furlough scheme is well established.
The financial markets have no clear trend as we enter the second week of the New Year. With Brexit now complete, there has been some encouraging news from the Bank of England. Its Director for Financial Markets commented yesterday that, so far, the transition has been exceptionally smooth, and the UK intends to continue to provide robust regulatory standards on a par with the EU.
The more visible transition involving freight and logistics has seen a few teething problems but, on the whole, the additional documentary issues requirements have been easily overcome. One possible exception is movement of goods between the mainland and Northern Ireland.
As part of the deal, the Province remains subject to EU regulation and the sheer weight of regulation is causing a delay which has encouraged Irish hauliers to demand greater support from Westminster.
The new cases of Covid-19 continue to be at high levels with the NHS being stretched close to breaking point. New hospital admissions are 50% higher than they were on Christmas Day and have reached the equivalent of a new hospital dealing with only Covid being opened every day.
The pound remains in a range, unable to take advantage of any Brexit boost, yet receiving support from a weakening dollar. Against the greenback, it fell to a low of 1.3532 yesterday but recovered to close at 1.3566.
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Democrat clean sweep not a blank cheque
The blame for the rioting has been placed squarely at the door of outgoing President Donald Trump. Condemnation of Trump’s incitement have been seen all around the world with UK Prime Minister Boris Johnson calling for a smooth transition of power and commenting that the scenes from Washington were an attack on democracy.
Senior Democrat Members of Congress have called for Trump to be removed from office with just thirteen days left of his Presidency.
Following the reinstatement of his social media accounts, suspended in the wake of his speech early on Wednesday evening, Trump took to Twitter to label the attack on the Capitol heinous, and committed to a smooth transition of power.
His most recent comments are being seen as the closest he has come to conceding defeat in November’s election and he has barely mentioned his contentions regarding the stealing of the election.
Even at this late stage, there have been resignations from Trump’s Cabinet in condemnation of the President’s actions. It remains to be seen if there will be any official move to impeach him and a lot depends on the tone of his rhetoric over the next few days.
The latest weekly jobless claims data which was released yesterday shows a distinct plateauing of the data. New claims were at 787k, almost the same level as the previous week, while continuing claims fell to 5072k from 5198k.
Today sees the release of the December employment report with analysts expecting 100k new jobs to have been created and a rise in the unemployment rate from 6.7% to 6.8% the first rise since the early days of the Pandemic.
Given recent concerns voiced by senior industry figures, the risk for the data is to the downside with a slight chance that the number could be negative.
The dollar index retains a downwards trajectory reaching a low of 89.35 but recovering to close at 89.82.
Mixed reports on sentiment point to varying recovery rate
Italy, for example, is slated to receive an outsized portion of the recovery fund but there is already internal wrangling about who will distribute the funding and where it will be used.
Relations in the Governing coalition are becoming increasingly strained with Prime Minister Giuseppe Conte at odds with his predecessor Matteo Renzi who has threatened to withdraw the support of his Italia Viva Party from the 16-month-old coalition.
Conte scored a major success when he secured 28% of the latest funding package from Brussels but is now accused of trying to centralize control of the Eur 208 billion excluding the rest of the coalition.
Conte’s plans for the support of the economy have been labelled devoid of ambition and soul and hark back to former ECB President Draghi’s comments about the use of the funds to provide a future for the young people of the Union.
Retail sales data that was released yesterday showed just how big a job the Union faces when it is able to emerge from lockdown. An increase of 1.4% in November was turned into a 6.1% decline in December as many retail outlets were forced to close.
Employment remains a significant driver for the Eurozone economy but there is no concerted plan from Brussels to drive job creation schemes across the region with individual Governments responsible independently.
The euro continues to flirt with resistance at 1.2320. Yesterday it managed to touch 1.2344 before falling back to close at 1.2265.
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.”