Monex: Ondanks goedkeuring coronavaccin in VK zetten Brexit-zorgen het Britse pond zwaar onder druk

2 december 2020

Hieronder volgt een kort commentaar in het Engels van Ranko Berich, Head of Research bij Monex Europe op de Amerikaanse dollar, euro en het Britse pond.

GBP
Sterling has been knocked sharply lower this morning by an anonymous report that Michel Barnier has told EU ambassadors that three obstacles remain in the path of a trade deal with the UK. Brexit news flow has been thick in recent days and yet not much in the way of concrete information is available aside from that offered by anonymous sources. Last night Times Radio reported Tom Newton Dunn claimed on Twitter that trade talks had entered the “tunnel”, or an intense phase at the end of negotiations. Sky’s Adam Parsons was quick to cite both EU and UK sources - anonymous of course - that negotiations could not become any more intense. The Financial Times, in turn, reported that Chief EU negotiator Barnier was coming under pressure from EU capitals over prospective concessions to the UK. Barnier spoke with EU ambassadors this morning, with Bloomberg quickly citing anonymous sources in reporting he told them that three obstacles remained to a deal. Additional briefings on the meeting may be released throughout the morning, further altering perceptions of its significance, and of the state of play.  Despite the crossfire of squirts from the EU source bottle, there is not much further to be said about the chance of a no-deal Brexit. We know that no-deal is still at least a plausible outcome, but is far less likely than the base case of a bare-bones trade deal covering most or all goods. Given sterling's buoyancy of late, it seems that if no-deal does materialise the pound will suffer further knee-jerk losses of the sort seen this morning, but at a greater magnitude. On a cheerier and more substantive note, the Medicines and Healthcare products Regulatory Agency has approved Pfizer’s vaccine for covid-19 for use in the UK from next week, marking the start of a global process where various vaccines are expected to gradually cover the majority of populations in the developed world by the middle of next year.

EUR
The single currency is trading slightly lower against the dollar today as the greenback bounces back. Nevertheless, EURUSD still sits near two and a half year highs, while sterling’s Brexit fueled weakness has resulted in the euro taking further ground against the pound this morning. The art of negotiation is in focus for the euro today, not only because Brexit negotiations show signs of stalling, but also due to Poland and Hungary showing resistance to passing the latest EU budget. Today, EU finance ministers gather again, but a change in Hungary and Poland’s position is unlikely, forcing the EU budget and recovery fund discussion to the EU summit on December 10th. Yesterday, ECB member Schnabel warned against markets expecting a blockbuster stimulus package from the central bank in December’s meeting. The central bank’s easing of policy will be aimed at keeping financial conditions at current levels as opposed to providing monetary aid to an economy battling a second wave. 

USD
Fiscal stimulus is back on the tip of investors tongues again this morning as the dollar bounces back against both G10 and EM peers, with only a few notable exceptions. Talks to clinch a relief package began yesterday as House Speaker Nancy Pelosi presented a fresh Democratic proposal, while Senate Leader Mitch McConnell floated a revised version of his previous plan to fellow Republicans. The movement by party leaders to ready a fiscal stimulus package comes after President-elect Joe Biden called for Congress to pass a “robust” aid bill as he unveiled his economic team which includes former Fed Chair Janet Yellen as Treasury Secretary. The rise in Covid cases in the US is seen as undermining the economic recovery just prior to the presidential transition, causing a push by the Democratic party to offset the effects with fiscal stimulus. While the dollar strengthens across the G10 currency board with the news of fiscal stimulus, the Australian dollar continues to trade in the green after a solid beat in Q3 GDP which came in at 3.3% vs expectations of 2.5%.