Sterling stayed afloat despite a tricky week, strengthening by an average of 0.2% against the other major currencies, but just about unchanged from a month ago. Lee Cain’s resignation is seen by some as evidence that the PM might be about to agree to a trade deal with the EU. He has until the European Council meeting in a week’s time to do so. Should that not happen, the two sides would surely come up with a new deadline, but only seven weeks remain until the 31 December cliff edge. After the House of Lords voted “overwhelmingly” to strike out the parts of the Internal Market bill prejudicial to the Good Friday agreement, the PM doubled down. He intends to pursue the legislation even at the cost of trade agreements with Europe and the United States. At least, that is what his team said, but given the lack of reaction from sterling, investors appear not entirely to have swallowed that line.
The election of Biden comes at an awkward time for the UK government, with the final episode of Brexit scheduled to air in the midst of the US presidential transition. Biden has criticised the bill as a threat to the Good Friday peace agreement, and if the UK does indeed end the year without an EU trade agreement, it will be more reliant than ever on cutting a deal with the US.
Chief Economist of the Bank of England Andy Haldane was typically optimistic that a Covid-19 vaccine means “things are going to get better at some point in the foreseeable future”. According to the British Retail Consortium, October saw another strong month of retail sales growth, but data from the ONS showed unemployment rising from 4.5% to 4.8%. Gross domestic product expanded by 15.5% in the third quarter after shrinking 19.8% in Q2. Figures for September indicated monthly increases of 0.2% and 0.5% for manufacturing and industrial production. All three of those numbers fell short of analysts’ forecasts.
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