Johnson refuses extra help for Manchester

The double whammy of Brexit and Coronavirus continues to dog the Government as deadlines come and go.

London and Brussels continue to demand that the other give ground in order to agree a trade deal while Boris Johnson stood firm and placed Manchester under the highest level of local lockdown in order to try to get cases of Covid-19 under control.

It seems as far as Brexit is concerned Johnson and his advisors are unable or unwilling to make the final gesture and confirm that talks are at an end and the UK will end the transition period of December 31st with no deal in place. Apparently, the door to a deal is still ajar.

The economic effect of the second wave of the Covid-19 Pandemic will have taken its full toll by the time Brexit decisions come into force with Q4 GDP unlikely to be as strong as had first been predicted.

The end of the original furlough scheme, which happens at the end of this month, could see a spike in unemployment as businesses that had failed to reopen throw in the towel. It must be remembered that only businesses in Tier three that are forced to close will receive the new support of 66% of salary.

The level of support that will be given in Rishi Sunak’s second scheme is considered insufficient and particularly unfair on the low paid, many of whom will be affected as pubs, bars and other hospitality venues are forced to shut.

That was the crux of the issue between Westminster and Manchester with arguments for and against the move to Tier Three based upon both the economic and medical effect of the move.

The Bank of England remains torn over a move to negative interest rates. It seems that independent MPC members have a different perspective from the Governor, his Deputy, and the Chief Economist. BOE Officials have access to more official data while the advisors are using instinct and theoretical models.

Meanwhile, the market sees the pound versus the euro as fairly equally affected by Brexit while versus the dollar the pound is in a 1.2880/1.3020 range. Yesterday it traded down to a low of 1.2911, closing at 1.2942.

Until that range is conclusively broken it is impossible to decide on a trend for the currency.

Considering your next transfer? Log in to compare live quotes today.

V-Shaped recovery a pipe dream

There are concerns that the lack of a support package for the economy could bring about a double-dip recession. This is despite far more bullish statements emanating from the White House. One official commented yesterday that the recovery was 90% complete but there is still work to do.

It is hard to produce a massive overstatement and a similar understatement in the same remark but that comment achieved the impossible!

One eminent economist commented yesterday that a V-shaped recovery is now impossible to achieve given the amount of time that has now passed since the original support Bill expired and the fact that unemployment isn’t falling more quickly.

Dr. Nouriel Roubini who is credited with predicting several major market disruptions well in advance also believes that only a Democrat victory in two weeks’ time will see the economy bounce back rapidly.

This would be brought about by a multi-trillion dollar support package that would provide the boost the economy needs. He is also confident that the Fed would be able to support such a package.

The pace of the recovery has slowed dramatically as evidenced by the weekly jobless data. This week’s PMI data is expected to support the idea of a slowing economy, although both services and manufacturing activity are still expected to remain in positive territory.

The final face-off between Trump and Biden will take place in Tennessee on Thursday. The Trump Camp complained that the two contenders’ microphones will be switched off while the other is making a statement.

Trump is well known for interrupting and insulting his opponent while he is speaking, which he will now not be able to do.

The dollar index remains hemmed in. Yesterday, it traded between 93.50 and 92.99, closing weaker on the day at 93.08

ECB on alert but powerless

Inflation still exercises the ECB like no other economic factor. The Central Bank has announced in the past few weeks that it is starting to become concerned about the current strength of the single currency as deflation continues.

This is likely to prove to be a drag on the economy as spending falls with consumers awaiting lower prices.

With the Pandemic continuing to spread, the retail sales data is certain to take another hit.

There is a real possibility that, depending on the price action of the dollar index between now and the period immediately following the election, that the euro could reach 1.2000.

That would cross a line in the sand for the ECB which could be forced to act. Verbally at first since it does not actually possess the ammunition to make a positive intervention.

Longer term, the prospects for the euro don’t seem quite as positive and this may encourage it to simply try to intervene verbally.

Since the region’s economy was in recession even before the Pandemic hit, and the second wave could outstrip the first, the likelihood is that it could be 2023 at least before the economy reaches pre-Covid levels.

Not only are Eurozone PMI’s expected to fall when they are released later this, week but so are those of Germany. In the recent past, positive German data has been seen to support the rest of the region but even the European powerhouse is witnessing both an economic slowdown and a rise in cases of Covid-19.

The euro rose above strong resistance at 1.18 yesterday reaching a high of 1.1840 before dropping back on a bout of profit taking to close at 1.1823.