Time is ticking

Across the pond, Donald Trump continues a long-established tradition of contradicting himself and prepares to fire off a series of potentially costly manoeuvres in his last month of office. Closer to home, Boris Johnson is still trying to ‘get Brexit done’, following the exit of high-level members of his cabinet. In the meantime, the market is pricing in positivity although the facts on the ground describe a profoundly mixed picture.

It is widely understood that Donald Trump’s continued legal case to exclude votes have little chance of successfully gaining him re-election, but he seems to be trudging on regardless. Over the weekend, Trump seemed to acknowledge a Biden victory, but then tweeted: ‘We have a long way to go. This was a rigged election!’. It seems Trump’s main aim is to delegitimise a Biden Presidency as much as possible. In the lame-duck session, an outgoing President would typically begin the handover process to the President-elect, taking little overt action that might conflict with the new President’s agenda. It seems Trump is breaking tradition here too. In his last month of office, Trump is set to drawdown troops in Afghanistan—which many fear will hand the region to Iran and the Taliban—while stepping up financial aggression towards China under a human rights context. Such actions will cause Biden to spend his first few months in office reversing Trump-era policies, which can have lasting repercussions for the nation.

Boris Johnson shed two of his closest allies last week—Communications Director, Lee Cain and Chief Adviser, Dominic Cummings—in order to pivot his strategy to a ‘less aggressive’ type of governance, which serves as cover for a policy reshuffle. Cummings was strongly in favour of Scale Up Britain, which aims to boost spending outside of the South of England. His departure may signal a reversal of this policy in Boris Johnson attempted reboot. Unfortunately, the PM has been exposed to Covid and will need to spend the next week in isolation, just as he was meant to be meeting MPs to brief them on his change of direction. Given that it is mid-November (the 4th deadline by our count) and no end in sight for Brexit negotiations, the pressure is ramping up to a new crescendo.

Bottom line: US and UK news stories go largely unacknowledged by the market today as economic data out of China signals continued recovery, with rising Fixed Asset Investment, Retail Sales and Industrial Production. The presence of a Covid vaccine has changed the prevalent thinking, irrespective of the time to practical deployment; markets see light at the end of a previously dark tunnel. The fact that the UK, and a good portion of the European continent, is back in lockdown and the US is desperately avoiding a nationwide approach, has hardly made a dent in financial assets. The market is also ignoring the entire constellation of central bankers, who continue to press for fiscal spending to counter an overworked monetary policy mechanism.

The week ahead


The trade-weighted Sterling Index climbed 0.5% last week after paring initial gains that pushed the Index to two-month highs. Dominic Cummings’ departure from Downing Street may be viewed as a positive signal for Brexit negotiations, which still appear to be blocked by key sticking points such as fishing rights. As negotiations continue this week, headline risk remains high and could create volatility for Sterling. Despite elevated risk appetite across asset classes following a historic free trade deal agreed in the Asia-Pacific region and strong Chinese data, the Pound trades lower against the Euro and US Dollar on Monday morning. Bank of England Governor, Andrew Bailey, will be speaking on Tuesday afternoon, while several MPC members will be speaking throughout the week.

  • Wednesday’s October CPI figure is expected to read -0.2%, down from 0.4% in September.
  • Friday’s GfK Consumer Confidence is forecast a -34 reading, down from -31 in September. This would be a quick deterioration from last month’s peak in the recovery back down to April’s lows.
  • Friday’s Retail Sales for October are expected to show contraction at -0.3%, down from 1.5% in September. Core Retail Sales reading is forecast -0.1%, down from 1.6%.


The Euro closed last week marginally lower on trade-weighted basis after early losses on Monday. The common currency found support at the 1.1750 level against the US Dollar, before climbing above the 1.18 figure where we open this week. A weaker US Dollar has benefitted the Euro in recent sessions despite clear downside risks to the Eurozone caused by lockdown restrictions across the region’s major economies. In a quiet week on the data calendar, ECB President, Christine Lagarde, will be speaking throughout the week, starting with the ECB Financial Stability review on Monday afternoon.

  • Wednesday’s Final Eurozone CPI figure is expected to be unchanged from previous estimates at 0.2% for October, and -0.3% year on year.
  • On Friday, Eurozone Consumer Confidence is expected to read -18.0 down from -15.5 last month, extending the indicator’s deterioration back towards lows reached in Q2 2020.


The US Dollar topped out mid-week on a trade-weighted basis just shy of its 50-daily moving average before paring gains and opens this week less than 1% off year-to-date lows. Dollar weakness briefly pushed EUR/USD above the 1.19 figure and GBP/USD above the 1.33 figure last week, as Covid vaccine euphoria rippled through financial markets. However, central bankers were quick to point out more support for the global economy is needed as the virus continues to spread. More vaccine and Covid treatment news are expected to be announced in the coming days which could provide short-term volatility to take advantage of. Several Federal Reserve members will also be speaking throughout the week.

  • Monday’s Empire State Manufacturing Index for November is expected to read 13.8 up from 10.5 previously, consolidating the indicator’s recovery over the last few months.
  • On Tuesday, October Retail Sales is expected to show 0.5% growth, slowing from 1.9% in September, meanwhile the Core reading is expected to show 0.6% growth, down from 1.5%.
  • Tuesday’s Industrial Production for October is forecast 1.0% growth, up from -0.6% in September.
  • On Wednesday, Housing Starts for October is expected to read 1455k, up from 1415k in September.
  • Thursday’s Initial Jobless Claims is forecast to show 700k people claiming unemployment, marginally lower than 709k last week. Continuing Claims is expected to show a bigger improvement from 6786k to 6400k.
  • The preliminary November readings of Markit’s Manufacturing, Services and Composite PMIs are released on Friday. Last month, all three sectors achieved expansion led by the Services sector.

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