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One of the largest risk events of the decade has been potentially avoided by a historic announcement from the UK and EU leaders today.
At 3pm GMT today the UK Prime minster Boris Johnson confirmed that a Brexit Free Trade deal with Europe had been done. A little while later he was up in front of the UK press explaining with a little more colour on the extent of the deal and answering the press’ questions.
The Jumbo size Canada style deal worth £668Bln is now up for scrutiny within both the UK parliament and by the European union and everyone needs to agree to this deal before it can be ratified. EU ambassadors will meet on the 25th December, the UK Parliament are likely to vote on the 30th December. Thus, avoiding the ‘No Deal’ shock, and ready for the 1st January 2021.
There was fiscal stimulus mentioned in the form of £100bln for the coastal and fishing communities who will need new infrastructure to catch, land and process more fish. The largest concession from the UK was in the form of gaining rights to the fish within our own waters, allowing the EU fishing boats to retain 1/3 of our fish a move from 50/50 between the UK and EU and within a transition period limited to 5 years down from the EU’s proposed 14 years.
Markets will be coming to a close shortly and the biggest movers so far have been with Volatility dropping and AAPL rising. EURUSD, EURGBP and GBPUSD are all around the +-0.5%, with cable ending the week strong for the 2nd consecutive week. GBPUSD closing above 1.3500 shows that there is appetite for more buying above this historic level, so next week and into new year, I’ll be looking for higher prices.
The US dollar remains range bound and has been all week, unable to crack Mondays high or low. US 10 and 30 yields are down today and look likely to end the week slightly weaker than the start. TLT’s price action this week even though it is range bound from the last week of November is hinting that it has found support and that could be the base Bonds need to start their move higher. So, any moves out of their tight downtrend will be closely monitored in risk adverse assets like the equities and commodities.
WTI and Oil markets had been weak from the London open but WTI found some buyers at the 200 sma on the hourly time frame and into the US session. Oil will end the week down which caps a 7-week bull run.
