So far so good

Investors have greeted the end of Britain’s transition from the EU single market with a degree of enthusiasm. Although it remains to be seen whether that will last, the pound was the top-performing major currency at the end of last year and the beginning of this. It is an average of 0.4% above Thursday morning’s levels.

The weekend was worth half a US cent, four fifths of a euro cent and three quarter of a Swiss cent to sterling. At the same time, it picked up two thirds of an Australian cent and just a quarter of a Canadian cent. The NZ dollar was the weakest among the majors, taking last place with a loss of one and a half cents to sterling and an average decline of 0.4%.

In 2020 as a whole, the GBP fell by an average of 2.9%, losing more than 5% to the EUR, CHF and AUD. The year’s uncontested champion was the SEK, which strengthened by 9.3% against the GBP and by 6.4% on average. The biggest loser was the USD, down by 3.5% against the GBP and by 6.4% on average. Whilst they are not currencies, it is worth noting that gold went up by 25% against its USD benchmark in 2020, touching a record high along the way, and the price of Bitcoin, a cryptocurrency, increased by almost 500%.

Georgia undermined

The most unhelpful story for the dollar this morning is the one about the US President’s hour-long phone call to Georgia Secretary of State Brad Raffensperger. Trump threatened Raffensperger with criminal proceedings if he failed to conjure up, retrospectively, more votes for the President in November’s election. A recording of the conversation found its way into media hands.

Even though the US President is no stranger to controversial comments, demand that “all I want to do is this. I just want to find 11,780 votes…” still sounded damaging to his party’s prospects at tomorrow’s special Senate elections.

Two seats are at stake because the voting in November was inconclusive. They are crucial seats. Unless the Democrats win both of them, they will continue to be a minority in the upper chamber of Congress and, if so, the new President will not easily be able to pursue his policy agenda. The Democrats are currently a couple of points ahead in the opinion polls. It is not obvious which outcome would be better for the USD.

Back to work

With the holidays and Brexit now behind them, and a full five-day week lying ahead, investors will now have to buckle down and get on with business. It being the first working day of the month, the focus today will be on the purchasing managers’ indices for manufacturing.

Australia set the wheels in motion with a 0.3-point decline to 55.7 while Japan followed with a 0.3 improvement to 50. China delivered a slightly disappointing 53.

The manufacturing PMIs from Europe and North America are all forecast to come in above the breakeven line at 50, with the UK pencilled in for an unchanged 57.3. The Bank of England’s lending and money supply figures appear at the same time. Sentix reports this morning on Eurozone investor confidence.