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Little progress to be seen

Muted passion for sterling

The equity market managed to show some enthusiasm for the Brexit deal, hauling the FTSE100 back up to the levels of early March as America’s DJ30 posted record highs. Currency traders were considerably less exuberant. They were happy enough to mark down the US dollar but that was about as far as it went. On average sterling is unchanged.

Sterling eventually booked a gain of half a US cent but it spent the entire London session - and then some - making its mind up. The hesitation was clearest in the performance of GBP/EUR, which milled around within a half-cent range all day before coming away precisely unchanged at €1.1023 (6am to 6am).

There is, and will for some time remain, a degree of uncertainty about the economic aspects not covered by the Trade and Cooperation Agreement (TCA). Investors are concerned about the future of the UK financial sector and its important contribution to GDP. Whilst The City’s pre-eminence as a financial centre dates back centuries, way before the concept of Europe, in those days there was no nosy neighbour in Brussels to get in the way. At a more immediate level, there are concerns about the reluctance of European hauliers to get caught in cross-Channel traffic holdups.


Senate Leader annoys everybody

If investors’ appetite for the pound was modest, they wore on their sleeves their aversion to the US dollar. At the back of the field the Greenback lost half a cent to the euro and went down by two fifths of a Japanese yen, falling by an average of 0.5%.

To an extent they were following the trend that has been in place since May, which has taken the dollar 12% lower against sterling and sent EUR/USD 13.5% higher. More specifically, though, they were reacting to another twist in the tortuous progress of the fiscal stimulus package. It was set up to include a $600 Treasury cheque to low earners but last week the President proposed – and the House of Representatives approved – increasing that amount to $2,000.

Yesterday evening, Senate Majority Leader Mitch McConnell put a spanner in the works when he refused permission for a swift vote on the matter. In doing so he annoyed both the President, whose idea it was, and the Democrats in the House who, for once, agreed with the President. At the same time, he spoiled things for investors, who had been ready to welcome the increased stimulus.


Mostly about houses

Tuesday’s grandly-named S&P CoreLogic Case-Shiller Index revealed that “home prices continue to increase at a modest rate across the US” in October, and were 7.9% higher on the year. Nationwide said this morning that UK house price growth was almost as strong at an annual 7.3% in calendar 2020.

This morning’s economic data continue with Spanish inflation and ZEW’s survey of Swiss business confidence. After lunch the United States reports on wholesale inventories, the balance of trade and pending home sales, while ISM-Chicago publishes its purchasing managers’ index.

Parliament will today vote to approve the TCA that was agreed last week. The session begins at 0930h and the result is a foregone conclusion.

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