Good morning,

Yesterday,  Prime Minister Boris Johnson illuminated the route out of lockdown.  Having enforced one of the most stringent lockdowns in the western world,  followed by one of the world’s fastest vaccine programs,  Johnson has finally afforded himself some room to manoeuvre.  With a reinvigorated approach,  and to prevent any further U turns,  the path is laid with extreme caution as we are on a “one-way road to freedom.”
The route is clear,  schools to open in two weeks on March 8th,  freeing parents who have had to master the art of home schooling and work,  as part of a phased plan that goes through four stages,  with at least five weeks between each stage.  The calendar highlight is June 21st,  when the final restrictions will be lifted,  and no sooner.  There is a very visceral feeling that the UK has started to show the kind of mettle that should have prevented the fifth highest death toll in the world,  and that is percolating into the FX rates we are seeing;  as GBP is enjoying somewhat of a renaissance as the bull market pushes it higher across the board against a basket of currencies. There was the typical ambivalence from business leaders as the measures were announced,  some of whom say they do not go far enough in letting the economy open sooner, while some say the approach is too fast,  one thing is clear,  despite the inspiring data regarding the vaccine roll out,  a slow and cautious approach is likely to be adopted by many other countries too.

Britain has not had it all its own way,  unemployment rose to 5.1% in the last three months of 2020,  the highest since the first quarter of 2016.  However this is still significantly lower than it would be,  without the government’s furlough scheme,  which the Bank of England forecasts will push the unemployment rate to around 8% in mid-2021 when the scheme ends.

The data was light in the United States yesterday,  who had a sombre landmark to respect,  as President Biden led a minute’s silence to remember the half a million coronavirus deaths so far,  the first country to pass this milestone.  There is a raft of data due this week,  including Consumption which is anticipated to rise in January as everyone utilised their stimulus checks.  The GDP Q4 second reading on Thursday is anticipated to show a slight uptick from 4% to 4.1%,  and core PCE,  the FED’s preferred measure of inflation,  which is set to remain subdued moving lower to 1.4% from 1.5%. US Federal Reserve Chairman Jerome Powell is giving his semi-annual testimony tonight before Congress,  which has added some trepidation to the US markets,  as there are fears over rising bond yields and accompanying inflation.  Typically,  this is a very routine affair,  however with ever deepening financial crisis and what potential steps the FED may take,  investors are going to be paying more attention to how Dovish Fed Chair Powell can be.

In Europe,  all eyes are still very much focussed on the stunted vaccine roll out,  the bureaucracy of getting 27 member states to agree has had a hugely detrimental impact on the bloc.

Have a good week.

This Morning Report was brought to you by Alex Ayoub


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