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Look on the bright side

Mixed blessings

Sterling’s reprieve became official last night when the European Union (Future Relationship) Bill received royal assent after being hustled through Parliament. It completed a day of mixed blessings for Britain, including approval for another Covid Vaccine, and a widening of the lockdown.

Both sides in the long-running Brexit argument can reasonably claim to have succeeded in their aims. The EU has protected the integrity of its single market, restricting the access of Britain and Britons to its territory and markets. The UK has asserted its sovereignty, albeit at the potential cost of tariffs if it chooses in the future to exercise it by breaking with EU conventions.

Investors might not be delighted that Britain has opted to weaken its economic links with Europe but they are at least relieved that the outcome has not been worse. The pound shared first place yesterday with the Australian dollar, strengthening by an average of 0.4%. Its achievements over longer periods look less magical. From the end of 2019, it is an average of 2.6% lower, with losses of 5.25% each to the EUR and CHF. Compared with its levels on the eve of the referendum four and a half years ago, the pound is an average of 10% lower, having fallen by 8% against the USD and by 15% against the EUR and CHF.

 

Record US deficit

There were not a great many economic statistics for investors to play with but there was more green than red to be seen on their screens. Even the -0.6% inflation reported by Spain was better than the forecast -0.7%.

The two numbers from Switzerland were unambiguously positive. KOF’s economic barometer was four points above forecast at 104.3 and ZEW’s measure of Swiss business confidence was within five points of a ten-year high, up from 30.0 to 46.8. For any other currency, the data might have provided some uplift but with the Swiss National Bank overseeing the situation the CHF was unchanged on the day against the USD and EUR, down by three quarters of a cent against sterling.

The US Census Bureau reported a goods trade deficit of $84.8 billion for November. It was the widest-ever gap. The Chicago Business Barometer, AKA the Chicago Purchasing Managers’ Index, was two and a half points higher than expected at 59.5. US pending home sales (contracts exchanged but not completed) were down by 2.6% in November and up by 16.4% on the year.

 

Early finish

Only the most desperate traders will want to get involved in the FX market today. The only significant ecostats before midnight will be US weekly jobless claims, which are forecast to have risen again.

With little to look out for today or tomorrow, investors with any remaining year-end housekeeping to finish off will be keen to get it sorted out as early as possible.

But hopefully; with a selection of vaccines and a post-Brexit trade deal agreed, things can only get better in the new year!

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