UK economy remains under pressure
The pound fell on Monday as investors continued to sweat over the prospect of the UK crashing out of the European Union without a deal amid ongoing differences on fishing quotas, with just nine days to go until the year-end transition deadline.
Without a deal by year-end, trade between the UK and EU will default to World Trade Organization (WTO) rules, which some argue could see both sides increase levies, leading to higher prices.
The weakness in the pound comes as data showed the UK economy rebounded by more than expected in the third quarter as the country emerged from the spring lockdown.
Still, the Bank of England chief economist Andy Haldane said the economy remains under pressure and called on the government to continue supporting the labor market until the pandemic is over.
The dollar is on the back foot, shrugging off President Trump’s rejection of a crucial part of the stimulus bill as tensions about the covid strain recede. Optimism about an imminent Brexit deal and a packed day of data await traders.
President Donald Trump said that the relief package that Congress passed is a “disgrace” – specifically referring to checks sent to all Americans, the most symbolic part of the $900 billion package. He wants it raised from $600 to $2,000.
The dollar was down on Wednesday morning in Asia, despite caution over the new B.1.1.7 strain of the COVID-19 virus pushing investors turn toward safe-haven assets.
Despite the euro not needing an extra push to consolidate its upward trajectory, the release of PMI figures this morning helped the European currency garnish further bullish momentum needed to clear some hurdles. First came French and German data, both seeing a significant boost in the services sector after both countries have recently come out of strict lockdowns during the month of November.
That said, the health crisis seems to be getting worse before it gets better, and these optimistic readings could easily fade away if social restriction measures remain much longer. The overall figure for Eurozone was again much better than expected both in services and manufacturing, keeping momentum going in the euro. Despite the December data being better than expected, all three readings continue to be in the contraction area for services.