Today’s only market-moving remark came after an EU diplomat quoted by Reuters. It sent sterling lower with EUR/GBP heading towards 0.8950. The EU diplomat stated the obvious though by pointing out that only a few days are left for EU talks. “Without London taking the necessary decisions quickly, reaching a deal will be all but impossible. Time is running out quickly.” The diplomat referred to the key issues of fisheries, a dispute settlement system and the level playing field. EU chief negotiator Barnier and his team traveled to London today to proceed with face-to-face meetings following his quarantine. EU leaders meet on Wednesday next week. The EU budget is their main agenda, but the possibility remains that they send a trade deal to European parliament if one is agreed by then. The EU budget stand-off isn’t cleared out neither yet with Polish PM Morawiecki and his Hungarian counterpart Orban strengthening their opposition. They want to separate the EU budget ratification process and corona-related fiscal stimulus deal from the debate over the rule of law mechanism. Both want the letter to be modified significantly and therefore threaten with a veto.
Trading on other markets was subdued today, with traded volumes still low because of many US absentees. The dollar remains in the defensive with EUR/USD near 1.1950 and the trade-weighted greenback about to test the YTD low at 91.75. The US yield curve bull flattened with yields 0.5 bps (2-yr) to 3.7 bps (30-yr) lower in a catch-up move with German yields yesterday. Changes on the German curve vary flat and +0.5 bps across the curve. 10-yr yield spreads vs Germany narrow by up to 2 bps.
After the long Thanksgiving weekend, its back to business in the US with a series of high profile economic data and key Federal Reserve events next week. ISM business confidence held up very well, especially in the manufacturing sector in October. We’re keen to see the impact of the rising coronavirus cases as well as the US elections outcome on corporate America’s sentiment. Several US states have begun imposing restrictions once again to contain the virus. We’re seeing the first cracks in the labour market in the back-to-back rise in jobless claims. Risks for the official November US payrolls on Friday are thus tilted to the downside. Fed chair Powell appears before Congress in a testimony entitled “The Quarterly CARES Act Report to Congress”. He’ll defend the Fed’s monetary policy stance and faces questions about USTS Mnuchin decision not to extend several emergency programmes and to withdraw unused Congressional funds. Markets are also eager to hear Powell’s comments on the recent wave in the pandemic and what the Fed will or won’t do to cushion the economic impact.
The pro-independence Scottish National Party’s leader Sturgeon said an independence referendum should take place next year. Sturgeon hopes to secure another victory at the May 2021 elections, which she could then consider a mandate for a referendum. Scots voted 55%-45% against independence in 2014. Both Brexit and more recently the British government’s approach to the pandemic have currently tilted the balance however.
Swedish GDP grew a more-than-expected 4.9% q/q in Q3 after tanking 8% in the second quarter this year. Household consumption recovered 6.3% after the -7.9% blow in Q2. Investments rose 2.4% q/q/, up from the -4%. Exports jumped 11.2% as did imports (9.2%). Despite the positive surprise growth is still -2.5% lower compared to the same period last year. The Riksbank earlier this week also downgraded growth forecasts for this year and the next due to the second wave of the pandemic. EUR/SEK trades stable near 10.15.