Over to you Boris!!
Where to start? Boris won big, and the markets relief at the Brexit blockade breakthrough sent Sterling soaring. The publication of the exit poll at 10pm triggered Pound buying that peaked at 1.2070 on the Euro (2.3%) and 1.3500 on the Dollar (2.7%).
The Tories achieved their best result since 1987, Labour managed the worst performance since 1983 and The Liberal Democrats leader Jo Swinson was unseated. Jeremy Corbyn signalled he would step down as leader and intigate a review of the policies and direction of the party.
Prime Minister Johnson’s substantial majority enabled him to announce a quick move to bring the Brexit Withdrawal Agreement back to parliament and the expectation is that the Withdrawal Agreement will be passed enabling the UK to leave the EU before 31st January 2020. It is also expected that the Government will seek an extension to the transition period, given the long-run risks of leaving the EU’s Single Market too early. The easing of political uncertainty will improve near-term economic confidence and also potentially prevent any Bank of England move to cut interest rates.
US initial jobless claims increased sharply to 252,000 in the latest week from 203,000 previously, although continuing claims declined slightly on the week. The US data overall had little impact with the dollar unable to make headway.
Yesterday afternoon however, there were comments from President Trump that they were very close to a big trade deal with China and both sides wanted it. There was an immediate boost to risk appetite on the remark with US equity indices spiking to fresh record highs and the dollar strengthened. The US currency gained further traction following a media report that the US had offered to cut existing tariffs by up to 50% and cancel the December 15th tariffs
The ECB made no changes to interest rates at the policy meeting with the deposit rate at -0.5% and main refinancing rate at 0.0%. ECB President Lagarde stated that incoming data pointed to muted inflation pressures and weak growth. There were, however, initial signs of stabilisation in growth and signs of higher underlying inflation, in line with central bank expectations.
As of writing, the Euro is trading at 1.1170 against the Dollar
Data to watch
13:30 – USD – Core Retail sales
13:30 – USD – Retail sales