GBP Recovers As EU Considers Fresh Fishing Rights Proposal

Hi there, my name is Anthony Cheung. I'm the head of market analysis here at Amplify Trading. If you'd like to access our private chat room to exchange trade ideas with professional traders from around the world, then check out Amplify Live by following the link below. Okay, very good morning to you. It is Tuesday the 22nd of December, so a quick run through then of some of the fundamental news that's been in play from overnight that's going to be important for the session ahead. I'll leave the technical analysis for my colleague Sam North. He'll be in the Amplify Live Discord chat room and he'll go through the charts in a bit more detail from that perspective. But just having a quick cross-check at the general cross-asset class mix, and yeah, I was, I was quite surprised actually last night. I came back to the screens probably around 10 PM or so last night, having left probably around half 4 in the afternoon London time. And actually, the, the recovery— I was quite shocked. It felt, obviously felt quite heavy yesterday. The new variant of the virus that's ultimately led to, I think I read up to more than 40 countries now have basically imposed a travel ban on Britain in order to try and contain what is said to be the origination here in the southeast of England. And things were looking quite heavy in the morning, but as soon as really Europe left the market and we did see other things like the final kind of confirmation last night, the Senate passing the stimulus bill, but much of that was expected. So any of that selling was just bought into and very aggressively so. And as you can see from these major 3 indices, the Dow completely reversed and some going into the close, the NASDAQ the same, as was the S&P. And, you know, looking at where we are now, we're, we're pretty neutral and flat, uh, exiting out the initial volatility to get the week underway. So a couple of other things though. Oil's still looking a little heavy. Obviously there is still this new, um, this new escalation, if you like, in the COVID-19 situation, and travel bans certainly are going to start impeding further things like fuel demand and also general manufacturing activity if we need to go into more, more stringent lockdown as what we're seeing now in Britain, but probably most likely elsewhere as well. So just having a look at the oil market, it's still traded a little heavy here as early Europe has come into the market, albeit we're still off the initial lows that were seen yesterday, which was around $46.25, but down about 87 cents this morning. Elsewhere, gold as well, after having been fairly elevated originally, actually we saw quite an unwind, unwind of those trades through yesterday's European morning. And again, we're remaining lower, down around $10 at present at around the $1,870 level. Just looking here, that level, just bringing into context then some of the previous highs and support levels that we saw just last week, going back to 16th and 17th. So looking on the, the bigger picture on the daily, just seeing where we are at the moment, you can see this kind of gap in price movement. And that area on the daily continuation around 75 would be quite key to watch, which was of course that top that we had on the 9th of Dec. Otherwise, the other thing in the currency market, the dollar a little bit firmer, up about 0.2%, but worth noting this from last night. Let me just move this. So, um, I actually did this markup last night just when I was looking at a few different things. Well, if I move it to this side, it'll be easier. And this can then kick off some of the first pieces of news that we can talk about. But quite a violent uptick seen in the pound, and also seeing a bit of a further uptick now this morning, looking to just narrow losses despite the general strength of the dollar that we've seen overnight. As you can see here, pretty much closed the gap then from where we finished electronic trade on Friday following what was a positive development on Brexit. And what was that headline? Well, here it is: the EU is considering a fresh proposal on fishing rights from Prime Minister Boris Johnson in the 11th-hour trade deal. Basically, a few of the details to be aware of here in case we see any further headlines today The latest suggestion from Britain would see the EU reduce the value of the fish it catches in UK waters by about a third. As context, last week the UK was insisting the EU accept a 60% cut, so they've come down to a third. The EU negotiators on Friday said that they wanted 25% reduction, and that was their final offer. So again, such as any negotiation, we're zoning in now on the kind of landing spot of where this deal might then get get made. The UK has demanded that you accept a 5-year transition to the new arrangement rather than 7, according to people familiar with the matter, while the EU initially called for 10 years to adjust and the UK had proposed 3. So again, further narrowing there on both sides. UK ministers reportedly have drawn up plans as well for a potential Brexit legislation to clear both houses of Parliament and gain royal assent in a single day next week. I did also share quite an interesting article via the Amplify Trading Twitter account in regards to what would need to happen in respect legally to extend the transition period, which we know is the hard deadline on Dec 31st. It is possible, but essentially new legislation needs to be written and signed off in time, which is obviously going to be quite testing in order to get that done with the limited amount of time available. But again, many people would suggest there's a lot of pressure from at least MPs on the British side at the moment, in order that to deal with this new outbreak of the new variant of the virus and the increase in cases that, that it might be necessary to delay that negotiation. So that's the latest there. Otherwise, on the vaccine and the virus side of things, I mean, this was the a comment that came out yesterday. The World Health Organization held a press conference and they cautioned against major alarm over a new highly infectious variant of the coronavirus that has emerged in Britain, stating it was a normal part of the pandemic's evolution. So this is kind of what we were saying yesterday. It is quite typical of something of a virus. If you think about the common flu that we see seasonally every winter You know, the idea is there that people get or can have a flu jab every year, but the necessity is that they have to have a fresh jab every year because of the fact that the flu virus adapts and evolves so rapidly. If anything, by comparative terms, COVID-19 is actually much slower in that case. But the idea being here then is the ultimate kind of risk factor, both from a health perspective in, in medical science, but also from the markets. Perspective is going to be whether or not the vaccines hold up. And this was some of the latest being reported on CNN just a few minutes ago. Pfizer and Moderna are said to be testing their vaccines against the UK coronavirus variant. So that is definitely one thing, and from a results perspective, I'd be very keen to see. As I said yesterday, pretty mixed opinions really. A lot of people coming out looking to, I guess, assure the public that testing would still be effective, as would the virus or the vaccine. But ultimately, I think we're a few weeks away from knowing that for sure, given the fact that there's been several different types of variants of the COVID-19 virus identified geographically in different parts of the world. So any update on this would be quite key, I'd say. Obviously, from a relief point of view, probably more short-lived than the worst-case scenario, which is that the vaccines are rendered redundant. It would be definitely quite catastrophic on, on, as I said, both sides, from a medical health point of view and from a market's point of view. So definitely something to be vigilant for. The other thing, of course, came last night was the Senate. So they finally got this deal done in time for Christmas. So the Senate last night passed the year-end spending bill combining $900 billion in COVID-19 relief with $1.4 trillion in regular government funding and a slew of tax breaks for businesses. The legislation will now go to President Trump— this is normal procedure— whose aides said he would sign when he arrives at the White House this week. The other thing I thought I'd mention, just given the fact that obviously Tesla now coming to market yesterday, just pulling back a touch after their phenomenal ride that we've seen in their shares now that they've been included into the S&P S&P. Similar space here then. Apple, in an overnight report— well, came late yesterday on Wall Street— they're moving forward with self-driving car technology, and they're targeting 2024 to produce a passenger vehicle that could include its own breakthrough battery technology. Interestingly, it's according to people familiar with the matter, according to Reuters. So maybe worth just noting that. And separately, on other large mega-cap tech names, Wall Street Journal has reported overnight that Facebook and Alphabet, or Google, have agreed to team up against potential antitrust action. So that's quite interesting as well, given the pressure that they're under at the moment. Otherwise, in terms of the calendar for today, um, we've already seen the UK data come out. The Q3 quarter-on-quarter GDP 16% versus expected 15.5. The year-on-year -8.6. Against expected -9.6. So a little bit of a bump there, uh, perhaps in sterling, but relatively contained. The main, um, subject matter that's really going to be more definitive there undoubtedly is going to be twofold really. It's one of Brexit updates, which one can imagine we're probably going to get tweets and, and hearsay doing the rounds at some point later today. So it could well be quite responsive to that. Uh, and then also from a, um, a point of view of the latest with COVID-19 in the UK, according to the FT, the UK may not have enough coronavirus tests to meet surging demand in the coming weeks according to an internal government document. This because we're already seeing cases soaring at the moment. We're about to go into the Christmas season. Temperature is also going to be generally decreasing going into the new year. And so much of the anticipation is, is that there's going to have to be much more testing done. And the internal government documents suggesting there isn't enough coronavirus tests at this point in time. So it's definitely something to watch. Also, separately, the government's chief scientific advisor, Patrick Vallance, who you've probably seen on TV a number of times alongside Chris Whitty and Boris Johnson in those daily kind of updates. He's said as well yesterday that more areas of England are likely to enter the highest level of Tier 4 restrictions in the new year as the country braces for the new spread of this strain of the virus. So I definitely think that that's going to happen. I don't have too many, too much difficulty in predicting the fact that much of the UK will probably go down into some form of, of nationwide lockdown, much as what we're seeing in the southeast at the moment. I pretty much would would anticipate that to happen in the new year. But I would say for the time being, that was what was getting priced a lot for the pound yesterday. And importantly, it's— it's from— for a sterling trader's point of view, it has not maintained that downside pressure. So at the moment, it seems like the narrative for me on the key story in town, which is Brexit, has shifted slightly. It's almost like the severity of COVID has, has kind of lessened or soften the hardness of the Dec 31st deadline, with a lot of people now talking increasingly more so about an extension, which I think is, is what's reflecting a little bit in price at this point in time. Otherwise, on the calendar then, the other things we're looking out for would be the US GDP second reading of Q3, expected to be unrevised at 33.1%. We've also got existing home sales and the Conference Board's Consumer Confidence figure, both coming out at 3 PM. And that's pretty much it. So, yes, some really great content as well yesterday. I'm not sure if you saw it in the Amplify Live room. We had Eddie come on, did a full kind of explainer about Tesla and the inclusion into the S&P. We did the Forex 2021 Outlook, myself, Sam, Tim, and head of trading Piers. We're going to be doing the equity outlook today, uh, later on at 1 PM on Amplify Live, and we'll be doing the commodity outlook on Wednesday. So plenty more stuff to get our teeth into before we see out the Christmas break. So that's it for the time being. Gonna wish you guys a good day ahead and take care, and I will speak to you same time tomorrow. Thanks very much.