GBP tumbling as hard Brexit (rushed Brexit) fears take over
GBP: The sterling honeymoon has come to an end after the currency dropped by the most since last July, tumbling 1.1% to $1.3188. GBP/EUR fell from 1.2000 to 1.18000. The threat of a rushed ‘Hard Brexit’ resurfaced, and GBP tumbled.
Legislation from Prime Minister Boris Johnson will include text that guarantees the Brexit transition phase isn't extended beyond December 2020, even if no new trade terms have been secured. The pound had climbed to as high as $1.3514 on Friday as the Tories swept to victory, fuelling optimism there would be a speedy resolution to the Brexit deadlock.
UK unemployment now stands at a 45yr-low. This is the only bright point in a trend of very poor recent data for almost every sector of the UK.
USD: Decent data goes against the global trend. On top of the recent announcement of the US-China ‘Phase-One Deal’, the USD might be in line for some gains in early 2020.
However the Fed is unlikely to change its course on rates until there is a real trend in place – as we see from today’s comments from a Fed member: “It would take material change in economic outlook to support a rate change”
Today - manufacturing output, which comprises three quarters of all industrial activity, jumped 1.1% in November, the largest monthly increase since February 2018. The gain comes after manufacturing output fell in three out of four prior months and was down in seven of the first 10 months of the year.
EURO: Dismal data continues – manufacturing data in Europe and Germany was below target, and the German Finance Minister went as far as saying “the German economy is stagnating despite signs of an end to the industrial downturn”.
However, the bell-weather EUR/USD rate continues to sit in the middle of recent ranges near 1.1100.
AUD: Under pressure after the central bank published the minute of its last meeting which were downbeat.
Meanwhile, for my French clients – something you already know.. French workers are taking to the streets for the 13th day of a transport strike over President Macron's efforts to reform the pension system. The conflict is being complicated further by the resignation of Jean-Paul Delevoye, appointed by Macron to oversee pension reform, after it was exposed that he failed to report multiple side jobs. Strike organizers are hoping for a repeat of 1995, when they shut down a government pension reform effort following three weeks of strikes just before Christmas.
In Pars, tear-gas is currently being used on protestors.