Despite weak unemployment data from the U.K. and continued Brexit uncertainty, the British pound was a net winner on the week, likely due to the counter currency flows and the very positive vaccine news on Monday.
United Kingdom Headlines and Economic data
UK PM Johnson’s treaty-breaking Brexit laws face defeat in parliament. – “The Internal Market Bill is designed to protect trade between Britain’s four nations after Brexit. It contains clauses ministers say are needed to protect Northern Ireland’s delicate status as part of the United Kingdom, but would also break international law in a “specific and limited” way.”
The big market driver of the week came on Monday from Pfizer / BioNTech, announcing that their COVID vaccine is more than 90% effective. This sparked a big risk-on move across the financial markets as traders priced in the odds of an economic recovery coming sooner rather than later. This sentiment did fade by the Monday U.S. session, but lingered on to influence the markets through most of the week. Volatility in Sterling spiked higher on the news, but we saw a mixed performance as it gained against the safe havens and fell against the Comdolls.
UK unemployment rate continues to surge, rising to 4.8% – ONS deputy national statistician for economic statistics Jonathan Athow told the BBC: “We’re seeing a continuation of a weakening of the labour market, fewer people on the payrolls and fewer people employed overall. That is now passing through to increasing unemployment altogether.”
Sterling’s gains began to fade during the Wednesday and Thursday sessions, likely a move supported by a broad shift in risk sentiment towards negative. It’s likely traders were coming off vaccine news highs and focusing on the rising COVID cases in Europe and the U.S., as well as the falling odds of a new stimulus bill coming from the U.S. government. It’s also likely some pressure was coming from the high probability that EU-UK trade talks are going to go past the mid-November deadline.
UK house price growth hits 21-year high, weaker 2021 likely – “The Royal Institution of Chartered Surveyors (RICS) said its house price index rose unexpectedly to +68 from +62 in September, the highest reading since September 1999.”
UK tries to reassure business leaders over Brexit with new task force – “Fishing quotas, fair competition for companies in areas such as state aid, and how to settle future disputes are the main sticking points that have so far barred an agreement.”
UK economy grew by record 15.5% in third quarter, but second lockdown could derail recovery – The third-quarter bounce marks the U.K.’s sharpest quarterly expansion since records began in 1955, but GDP is still 9.7% below where it was at the end of 2019, the Office for National Statistics said Thursday
Boris Johnson’s Brexit has a Joe Biden problem – “With Trump’s defeat, there’s no longer any reason for the Europeans to fear that Britain will get a quicker, better deal with the Americans. No longer can Johnson threaten Brussels negotiators — or calm his fellow Tories — with the feint: Okay, so long, mes amis, we will do better with the Yanks.”