The UK has formally left the EU and the Pound has started the week on a decline as Prime Minister, Boris Johnson sets out a hard-line stance for European Union talks, once again sparking fears of breaking away at the end of the 11-month transition period without agreeing a trade deal. Johnson is set to speak today which is likely to further enforce this message and could weigh heavily on Sterling.
The UK is looking for a Canada-style trade agreement allowing for tariff-free imports on most goods; but this would then follow strong customs and border checks, and restriction of the flow of services such as banking – which of course is UK’s most dominant sector. Johnson warns that there is “no need” for the UK to follow EU rules and “in the unlikely event that we do not succeed, then our trade will have to be based on our existing Withdrawal Agreement.”
UK PMI’s are out this week and strong results could offer some support to a relatively frail Pound.
Whilst UK & EU trade talks are ongoing, the Euro has issues of its own to deal with as inflation remains low and is expected to stay at this level for some time, according to Luis de Guidos, Vice President of the European Central Bank (ECB). January PMI figures confirms this and whilst forecasts expect further contraction, we could see a softer Euro.
Head of the ECB, Christine Lagarde is expected to speak during the week which would give further indication on current EU economic health and could map out how we expect the Euro to move over the next 11 months.
US elections get underway in November this year, albeit a while away, votes for Democratic candidates kicks off in Iowa today.
Multiple unemployment data is to be released this week and is expected to be stronger than previously, pushing the Dollar higher, although Coronavirus continues to taint the currency as the outbreak continues with reports of more than 17,000 infected; airlines are cancelling flights to the mainland and several Chinese provinces have extended their New Year holidays.