Mid-Week Themes – The Economic Recovery, Geopolitics, and Brexit News in Focus

Bob Mason
Published: Jul 8, 2020, 21:35 GMT+00:00

A quiet week on the economic calendar has given the markets an opportunity to reflect and look ahead. All of this as Brexit talks resume.

Brexit - Flag of European Union

The second week of July and the quarter is in the middle. Throughout the end of last week and this week, various economic data has been released.

What does the published data reveal to us?

Economic data over the last week or two have certainly supported the market optimism of an economic rebound.

We’ve seen nonfarm payrolls from the U.S surge by record levels. And we have seen PMIs, retail sales, and industrial production recover.

It’s worth noting, however, that these are coming back from record lows. So, while the figures are supportive of even a V-shaped recovery, July numbers will need to maintain that upward trend.

When you see governments having to reintroduce confinement measures as a result of COVID-19 spikes that recovery could be tested. All in all, this will make the next round of economic indicators all the more relevant and influential. Expect plenty of sensitivity to the next set of numbers.

The markets are still bound to watch out for a return of the coronavirus.

In the meantime, are there any notable geopolitical developments occurring?

While Brexit remains a headline, the U.S and China tensions remain the biggest threat. We saw the U.S send two aircraft carriers into the South China Sea while China carried at war drills.

Since then, however, it’s been relatively quiet. The U.S has dragged the UK into the spat, however. Britain riled Beijing over plans to pull out of the Huawei deal. To top things off, offering 3m Hong Kong citizens with UK citizenship didn’t go down too well either…

Ironically, the U.S has asked China to ramp up imports in spite of the latest spat. That suggests that it’s nothing more than arm flexing for now, though things could deteriorate…

The US elections are bound to grow in importance, as their impact on the markets grows.

Meanwhile, Brexit news is off the news wires. Are there any developments in the process?

Following last week’s curtailed talks, Brexit talks are set to resume today after last night’s dinner in Downing Street.

The key to any deal remains EU access to UK fisheries. From an EU perspective, it is clear. No agreement on fisheries means no trade agreement.

News had hit the wires early in the week that the EU was willing to compromise, which delivered Pound support.

How much of a compromise they are willing to make remains to be seen, however…

There is the talk of a zonal attachment. This is where access to fish is based on the amount of time it spends in British waters. Scientific data would then provide the allotments…

All of this has stemmed from climate change. Britain’s waters are warmer and the fish want warmer water. EU fishermen, however, still want access to the fish.

Expect updates over the next couple of days to materially influence the Pound. Any agreement and the Pound should rocket.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

Did you find this article useful?