Quiet data week ahead, coronavirus cases to take headlines
Last week saw very little in terms of market volatility, as traders, investors and businesses got back to normal working order. With a sparse economic calendar this week, it could be another quiet time in the market, something that was a rarity for the whole of 2020.
The UK has now reported over 1,000 daily deaths from coronavirus 4-days in a row. Positive cases are currently over 54,000 per day and chief medical officer Chris Witty said over the weekend "We still have weeks to go before vaccines will start reducing Covid deaths and some weeks later, the number of people being hospitalised". So far, investor sentiment is looking past the horrendous daily figures from the UK, but it may be a matter of time until that changes and the Pound starts to fall on this news.
We already know that medium-term things are looking very promising for the UK and the Pound, especially if the vaccination progress continues to outpace the other major nations in the G10. From what we are reading, it's pretty much damage limitation until lockdown 3.0 is over, which is likely to be in April at this stage.
Two separate problems are also keeping Sterling grounded at the moment and they are; a potential Scottish independence referendum and negative interest rates. The former is being pushed by SNP leader Nicola Sturgeon for the end of March and if negative rates are coming, it will be sooner rather than later. Both have the capability to create turmoil in the coming weeks and months for the Pound and the UK.
Later today, UK finance minister Rishi Sunak is updating parliament on the economy and there is also an MPC meeting on 'the international evidence of the transmission of negative interest rates'. Other than that, the EU minutes released on Thursday should give us some insight into what path the ECB takes in 2021. This is followed by November's GDP figure from the UK on Friday, which saw the start of new restrictions come into place for the hospitality sector.