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Week Ahead: Brexit deal on the horizon? Plus Spending Review & PMIs take focus
Brexit tops the agenda, again, this week as a deal might finally be on the horizon. Elsewhere, Chancellor Sunak is ready to showcase the latest government spending review, while PMI releases come thick and fast across the UK, EU and US. What will next week bring?
A final end to Brexit negotiations may be in sight after years of posturing and circular negotiations. Michel Barnier is expected to brief member states on Friday 27th November. Could a deal really be struck?
The UK has finally been willing to compromise on key sticking points, such as competition rules.
Optimism has also been caused in the reshuffling of the senior government advisor deck as the more hardcore “leave at any cost” voices in Number 10 have lost a lot of their loudness.
But any optimistic feeling should be cooled by scepticism. This still a very big maybe. Certain countries, like France, may object to fisheries outcomes, and keep negotiations going.
GBP/USD is currently holding at over 1.32, but any further rallies could be tempered by the fierceness of UK/EU negotiations at this stage.
It’s clear we’re not out of the Brexit woods yet, so what will next week bring?
November 25th will see UK Chancellor Rishi Sunak conclude his 2020 Annual Spending Review.
Essentially, it will act as a watered-down Autumn Statement, and provide a look into government spending plans for the coming months.
This is a one-year spending review, rather than the normal 3 to –4-year outlook. After all, 2020 hasn’t exactly been a “normal” year, and spending has taken a different tack to regular outlooks as the country continues its pandemic battle.
The spending review’s key talking points are:
- How will he treat coronavirus spending – Will he create a separate “Covid reserve” fund for instance?
- The shape of Brexit spending plans – With a deal still looming, what will Brexit-related spending look like?
- The overall generosity of the Chancellor’s spending plans – How deep will he dig into the UK’s pockets?
- What happened to prior commitments – Has he actually stuck to prior spending promises?
- The state of public sector pay – Will front line workers see extra in their pay packets?
- Infrastructure & investment – Will we be seeing any extra infrastructure spending, especially in light of the proposed 2030 ban on internal-combustion vehicle sales?
- Broader outlook for tax, spending, and public finances – What are his more general plans, and how will the pandemic shake them up?
It’s a PMI bonanza next week. New data will be released by EU member states, the US, and the UK.
October’s PMI release was full of optimism for the US, indicating that its economy was still growing strongly that month. Manufacturing, in particular, performed well. Business overall express positive sentiment, as it eyes up further stimulus packages.
The EU outlook was not so rosy. October data has put forecasts in a recessionary mood. Manufacturing is below the global index, while services continue to struggle in lockdown phase 2. A double-dip could be on the way in Q4, but we’ll have to see what the new data brings up.
The UK also faced a backslide after an optimistic September. October brought similar conditions to the EU, with services slipping and manufacturing also underperforming. Output is roughly now 10% under pre-pandemic levels.
US economic data
In addition to its PMI releases, the US has more economic confidence indicators up its sleeves to reveal next week.
Firstly, University of Michigan Consumer Confidence data will be unveiled. October’s edged forward against September’s, and perhaps the PMI optimism will leak into higher consumer confidence?
A new batch of US unemployment data will also be released. Unemployment claims have been fluctuating in recent weeks but appear to be on a downward trend. Claims from week beginning November 9th moved from 757,000 to 709,000, so will the slide continue?
Major Economic Data
|Sun Nov 22||9:45pm||NZD||Retail Sales q/q|
|NZD||Core Retail Sales q/q|
|10:00pm||AUD||Flash Manufacturing PMI|
|AUD||Flash Services PMI|
|Mon Nov 23||All Day||JPY||Bank Holiday|
|8:15am||EUR||French Flash Services PMI|
|EUR||French Flash Manufacturing PMI|
|8:30am||EUR||German Flash Manufacturing PMI|
|EUR||German Flash Services PMI|
|9:00am||EUR||Flash Manufacturing PMI|
|EUR||Flash Services PMI|
|9:30am||GBP||Flash Manufacturing PMI|
|GBP||Flash Services PMI|
|2:45pm||USD||Flash Manufacturing PMI|
|USD||Flash Services PMI|
|Tue Nov 24||7:00am||EUR||German Final GDP q/q|
|7:45am||EUR||French Prelim GDP q/q|
|9:00am||EUR||German ifo Business Climate|
|11:00am||GBP||CBI Realized Sales|
|3:00pm||USD||CB Consumer Confidence|
|USD||Richmond Manufacturing Index|
|8:00pm||NZD||RBNZ Financial Stability Report|
|Wed Nov 25||12:30am||AUD||Construction Work Done q/q|
|5:00am||JPY||BOJ Core CPI y/y|
|EUR||ECB Financial Stability Review|
|1:30pm||USD||Prelim GDP q/q (second release)|
|USD||Core Durable Goods Orders m/m|
|USD||Durable Goods Orders m/m|
|USD||Goods Trade Balance|
|USD||Prelim GDP Price Index q/q|
|USD||Prelim Wholesale Inventories m/m|
|3:00pm||USD||Revised UoM Consumer Sentiment|
|USD||Core PCE Price Index m/m|
|USD||New Home Sales|
|USD||Personal Income m/m|
|USD||Personal Spending m/m|
|USD||Revised UoM Inflation Expectations|
|Tentative||GBP||UK One Year Spending Review|
|3:30pm||USD||Crude Oil Inventories|
|5:00pm||USD||Natural Gas Storage|
|7:00pm||USD||FOMC Meeting Minutes|
|Thu Nov 26||12:30am||AUD||Private Capital Expenditure q/q|
|7:00am||EUR||German GfK Consumer Climate|
|Tentative||GBP||Monetary Policy Report Hearings|
|12:30pm||EUR||ECB Monetary Policy Meeting Accounts|
|All Day||USD||Bank Holiday|
|11:30pm||JPY||Tokyo Core CPI y/y|
|Fri Nov 27||7:45am||EUR||French Consumer Spending m/m|
|EUR||French Prelim CPI m/m|
Key Earnings Data
|23-Nov||Prosus N.V.||Q2 2021 Earnings|
|24-Nov||Medtronic PLC||Q2 2021 Earnings|
|25-Nov||Deere & Co. (John Deere)||Q4 2020 Earnings|
|24-Nov||Xiaomi||Q3 2020 Earnings|
|24-Nov||VMware Inc.||Q3 2021 Earnings|
|24-Nov||Autodesk Inc.||Q3 2021 Earnings|
|24-Nov||Analog Devices Inc.||Q4 2020 Earnings|
|24-Nov||Dell Technologies||Q3 2021 Earnings|
|24-Nov||Compass Group plc||Finals|
|24-Nov||AO World||Interim results|
|24-Nov||Best Buy Co. Inc.||Q3 2021 Earnings|
|24-Nov||HP Inc (HPQ)||Q4 2020 Earnings|
|24-Nov||Dollar Tree Inc||Q3 2020 Earnings|
|25-Nov||United Utilities||Interim results|