As a whole, I would say that last week was pretty flat for Sterling; we didn’t see much movement in either direction which was pretty typical for the third week of the month- this week however, does have the potential to be different.
So what do we have ahead of us? First of all, PM Boris Johnson is expected to announce that the UK will be moved back into tiered restrictions at the end of the current lockdown in December, and that around Christmas, there may be a further loosening of restrictions. This will, of course, be followed by a stricter lockdown straight afterwards- given that it is only short term loosening, I am unsure if Sterling reacts positive to this if at all.
On Wednesday, Chancellor Rishi Sunak will deliver the Treasury’s latest spending review, this will be important as the country is waiting to see how the Treasury plans to support the economy long term- before we have known it, we are nearly at the end of the year and though vaccines are showing some hope, the end does still seem to be a while away.
Now- onto our favourite subject; Brexit. The good news is, the UK & Canada have agreed to keep terms same as what the UK had with the EU, which means there are no disruptions with any trade with Canada. The bad news is, we still don’t actually have a deal with the EU. The soundbites coming from negotiators is that things are progressing and the broader strokes of the deal have been agreed. The issue now doesn’t seem to be about whether a deal happens or not, it is more about the timing- to be honest, this is reminding me of the U.S/China deal last year.
As far as Sterling is concerned, the main economic data that I will be keeping an eye on is PMI’s on Monday morning- which will give a greater insight into how the economy is performing through the tiered restrictions & lockdowns. Rule of thumb with PMI’s is anything below 50 is negative- but if we remain above 50- then the market will be happy with that result.
This week will be more reactive considering the amount of announcements and potential risk with Brexit, if you have an upcoming transaction please don’t hesitate to contact me to discuss options to hedge yourself.