Good morning,

Sterling got a bit of a lift yesterday afternoon after a Tweet from a Times journalist said that Brexit talks have now entered the much hallowed ‘tunnel phase’ – though this hasn’t been confirmed. The tunnel is the part of the talks where negotiators try and go to radio silence and just concentrate on getting the deal done, with the hope that a lack of outside influence allows the negotiating heads to do what is necessary to get the deal done without the distraction of outside influence. This has made some EU states nervous of exactly what Michel Barnier is giving away and he’s actually going to be on a video call this morning to brief them on what has been offered thus far (so much of lack of outside influence!) *something just popped up on the news wires that Barnier is set to tell EU ambassadors there may be no deal – so much for the tunnel….

Sterling’s lift was relative though and the star performer was the Euro. Having broken above the magic 1.20 level versus the Dollar, there really was no stopping it. This move was really a result of investors wanting to move out of the Dollar, which is now at its lowest levels for a couple of years on an index basis. The move out of the Greenback comes amid a bit of political confusion in the States, with the government likely to run out of money on the 11th December unless both parties can agree an increase in expenditure to fund them. We’ve been here countless times before, but this time it’s also being used as a pre-text to get another countrywide bailout agreed, something that they’ve been unable to agree on since the last package expired on July 4th! There is a bipartisan working group that has proposed a $900billion package which probably has the best chance of getting through, but even they acknowledge that their plan isn’t going to please everyone. The overall theme from lawmakers seems to be that it would be inexcusable to break for Christmas without having something in place, particularly as covid cases there continue to rise and more local lockdowns come into play. As such we’d hope within the next week to see something.
Ionically, a deal here may not save the Dollar, as it’s invariably going to mean printing more of them and the US deficit growing even larger.

In the UK: Boris saw a large rebellion from within his party last night, but still managed to get the tier system voted in and as such it will go in force across the country today. 55 Tory MP’s voted against him and 16 abstained, which is the biggest dissent he’s seen so far (and usually something saved for much later on in a parliamentary term). The big re-opening today is being coupled with a relaxation of national laws that will allow stores to stay open for 24 hours to make up for lost time. The interesting one to watch will be Debenhams which, following news from JD Sports yesterday confirming they’re dropping their bid to take over the business, is going to hold a fire sale to get rid of as much stock as possible ahead of likely final closures in January. The high street will be hoping for a resurgence in Christmas shopper activity and Oxford Street is already looking reasonably busy this morning, so hopefully they’ll get what they’ve wished for.

Another UK positive has come as Pfizer got their vaccine approved by the UK regulator this morning, meaning it will be rolled out within days – with the first 800,000 doses on their way – and we’re the first country in the world to have approved it. Getting the vaccine rolled out is going to be a huge logistical challenge and nobody has been drawn on when the UK might see enough people receive it to provide ‘herd immunity’. The head of the US’ Operation Warp Speed has said that if things go to plan in the US then they could be at this level by mid-May, so on that basis you’d hope we’ll be at least a few weeks ahead of them.

Staying with positives: Tesco will be due an integrity award after they’ve said they’ll make the government whole on the £585m they got in business rates relief. Supermarkets have performed well in turnover throughout the pandemic but have had to spend hundreds of millions in extra covid measures and as such haven’t had the bottom line results that you’d expect. Despite this Tesco has said that they “firmly believe this is the right thing to do, and we hope this will enable additional support to those businesses and communities that need it”.

A fairly short report this morning, but that gives me a paragraph to plug a conference that takes place next week… AON are brave enough to be putting on a virtual trade show of sorts (which could be the best kind of trade show in my eyes) hosted over a number of days with some interesting speakers to boot (and me). The upside is that you can register and then engage as and when you’re able to. There are some more details and also the registration link, here.

Have a great day

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