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Market Update

• Posted by currencies in Bank of England, Brexit, coronavirus, Dollar, Economy, election, EUR, Fed, No Deal, Prime Minister, Sterling, UK, Uncategorised
• January 28, 2021
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GBP has fallen this morning against major currencies off the back of comments from Boris Johnson yesterday that seem to suggest the current lockdown in The United Kingdom will be extended until at least the 8th of March. This decision has been driven by the fact that the PM believes if the drop in cases and subsequently a fall in deaths would make it safer for schools to return, signalling the first stage in lifting the lockdown.

Earlier in the week, GBP unemployment rose to 5% for the first time since 2016 relating to over 800,000 jobs being lost due to the stop start effect the national lockdowns have had on the economy. Employers had made a record number of redundancies between September and November due to the initial ending of the Furlough Scheme, which albeit was extended it was too late for many of the job losses.

The Euro is coming under pressure with Business confidence declining in Germany in January again ultimately off the back of further restrictions and lockdowns. More importantly, with Germany being accountable for 40% of The Eurozone performance, it is expected that Euro-Zone business confidence will also drop for January.

The EU is also feeling the effects of a decision to delay the agreement with AstraZenica for the roll out of millions of Vaccines in Europe. This has led to The EU being approximately 3 months behind The UK which has added to fears and pessimism about the chances of The European economy returning to normal sooner rather than later.

USD has held steady after yesterday’s Fed Reserve meeting. Throughout the session there was speculation around what would happen to the Interest Rates moving forward. The current rate of 0% – 0.25% has been maintained for the time being with Fed Reserve Powell stating, “the economy is a long way from our employment and inflation goals.” Similarly, to the EU, any progress on employment and inflation will be largely dependent on the vaccine roll out over the coming months.

All eyes are on the 4th quarter GDP figures for the U.S with expectations suggesting an annualized rise of 4.1%. Quarter 1 is expected to be weak given the renewed virus restrictions, but the growth is expected to come thereafter due to the vaccine roll out and ultimate ease of restrictions.