GBP

Sterling slipped from its highs yesterday as recent vaccine optimism has waned and a lack of progress of Brexit negotiations has seen downward pressure. This was then further exacerbated this morning as UK GDP missed estimates coming in below par at 15.5%. However this is a rebound from the previous quarter but does point to Britain’s economic recovery possibly slowing before the recent lockdown.

Fears are now resurfacing around the likelihood of negative interest rates as investors fear that the economic fallout from a second lockdown combined with the threat of a no-deal Brexit may push the Bank of England to introduce negative interest rates in the new year. Money markets are now pricing in the possibility of negative interest rates in the UK by August 2021. However, if the vaccine can be introduced and a no-deal can be avoided, it would be very unlikely that such action would be utilised.

Key announcements

• 13:30 – USD – Consumer Price Index ex Food & energy (MoM) (Oct); expected to remain at 0.2%
• 13:30 – USD – Consumer Price Index ex Food & energy (YoY) (Oct); expected to increase to 1.8% from previous 1.7%
• 16:45 – USD – Fed Chair Powell Speech
• 16:45 – GBP – Bank of England Governor Bailey Speech
• 16:45 – EUR – ECB President Lagarde Speech