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A very different Christmas

Monday blues

On Saturday afternoon, the UK Government revised its guidelines on Christmas household mixing, now that a new, more contagious strain of the Coronavirus has been found to be rapidly increasing the ‘R’ number and hospitalisations in parts of London and of South and Eastern England. Those areas now find themselves in a newly-devised tier four category and are banned from sharing the festive period with anyone outside of their own household. In England’s other tiers, the mixing of families will be Christmas Day only. That will also be the case in Scotland, before a full lockdown there starting Boxing Day. Wales is now under the most stringent level 4 measures.

Since the announcement, Scotland has put a ban on entry from south of the border, and a growing number of European countries have banned travel from anywhere in the UK. Also The Channel Tunnel is closed.

Back to Brexit

The pound had already been the worst performer on Friday; pushed by EU chief Brexit negotiator Michel Barnier’s Brexit deadline bluff to The European Parliament. Today, in Asian trading overnight and with Europe now online, the sell-off has accelerated. Fuelled by the idea of the UK being cut-off under new restrictions, sterling is currently down over 1.5% against the dollar and close to that mark vs. Yen and Swiss franc. It is at least a cent lower against its other major pairs.

Away from Covid horrors, on Saturday the UK reiterated that the EU must ‘shift its position’ on fisheries for a trade deal to be struck. On Sunday a tweet from Michel Barnier had the tone of a man still believing the cliff edge could be avoided with compromise. However, his ‘moment of truth’ is complicated by the backlash back in Brussels from the European Fisheries Alliance, who believe he is giving away too much in pursuit of a deal.

And the rest of the world

On Friday, The Bank of Japan left interest rates unchanged at -0.1%. Of more significance, the Bank committed to extending its asset purchasing facility by 20trn Yen for another 6 months - to September 2021. Up to 15trn is earmarked to support corporations and the yen remains a very unattractive investor proposition heading into the New Year.

On Saturday, news broke that a compromise had been reached in Congress (over the sticky issue of the Fed’s emergency lending powers,) meaning bi-partisan agreement for a much-needed $900bn Covid Relief Bill has got the green light. Its approval means $600 in direct payments going to American households, and an increase of $300-a-week in unemployment benefit. On Sunday evening, Senate Majority Leader Mitch McConnell confirmed a deal has been agreed between congressional leaders and that “more help is on the way”. Tesla’s debut on the S&P 500 will be the other performer to look out for stateside.

Economic data is light today. The UK’s CBI Realized Sales is forecast to show its first positive since September; Canada’s monthly New House Price Index should remain close to +1% and therefore extend its pattern of biggest month-on-month rises since before the crash of 2008; and consumer confidence in Europe will remain close to the -20 reading of April, the worst since 2012.

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