Hard Brexit and curfew in Paris

Financial and commodity markets analytics

Market Watch review. 16.10.2020

In today's release, we’ll cover the following topics:

  • Another delay in Brexit.
  • No incentives or global risk off. 
  • Second wave of COVID-19 and curfew in Paris. 

On October 15, the deadline that British Prime Minister Boris Johnson set for negotiations on a trade agreement with the EU expired. However, the parties are far from reaching an agreement. The head of the Cabinet Office of UK argued that if there is no deal to the specified deadline, London will "move on" and build relations according to WTO rules. Trade under WTO rules implies the full restoration of the borders that will lead to huge delays of transport. Even if the inspections are carried out in a few minutes, there will be many kilometers of traffic jams in the ports, which can stretch as far as London. The parties have one last chance to reach an agreement. Kingdom awaits statements from EU leaders summit, which started on Thursday, October 15 and ends on October 16. If consensus is not reached, we may see a strong gap in the pound at the opening of trading on Monday. However, in any case, the transition period has very little left to exist - it ends on December 31, 2020.

The dollar jumped to a two-week high as investors sought a safe haven on signs of a slowing US economy, and new fiscal stimulus is now unlikely until the US election date. All macroeconomic indicators this week are against the dollar: the number of Americans receiving unemployment benefits is growing again. Almost 900,000 new applications were added, indicating that the labor market recovery is slowing down. This upsets not only Jerome Powell, but also the US dollar. 

Also negative to the markets was added by data on manufacturing activity in New York, which fell more than expected. But most of all, markets were upset by the news that a proposal for a $1.8 trillion stimulus package approved by Donald Trump was rejected by the Republican majority leader in the Senate.  

Growth rate of new coronavirus cases accelerates. In the last 24 hours the number of newly detected cases of Covid-19 has been updated to a maximum of 399,000 against 381,000 the day before. The list of growth leaders for the day was headed by the USA (66,000 infected). The situation continues to deteriorate, which seems to have already started to affect the country's labor market. The number of those infected continues to increase in Spain, the Netherlands, Italy and Poland. Governments of some European countries do not rule out the introduction of repeated lockdowns (full or partial) on the horizon of the next two weeks.

France reached a record high of 30,000 cases yesterday. French President Emmanuel Macron announced the introduction of a night curfew in the Ile-de-France region, where Paris is located, and in eight other cities of the country in connection with the acceleration of the spread of the coronavirus. According to the President, the curfew from 9pm to 6am local time will be in effect for at least four weeks starting this Saturday.

Closely monitor the news background and be prepared for all the surprises of the market.


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