here’s no quiet after last weeks election storm in the UK, with a slew of political, central bank and macroeconomic events all on the docket. Of course the main focal point will be the House of Commons vote on Boris Johnson’s Brexit deal, expected to take place on Friday. Following the Tories comfortable majority victory last week this is all but certain to pass, which will pave the way for the UK to leave the EU by the end of January.

While this alleviates the ‘no deal’ uncertainty for now, investors are already beginning to focus on whether or not a full agreement can be reached with the EU by the end of the transition period on 31st December 2020. Johnson has voiced a hard line stance with this date, which can be attributed to much of the recent retracement in sterling.

The Bank of England will also be releasing its latest monetary policy announcement on Thursday. There’ll be no quarterly Inflation report or press conference from Carney. We will, however, be paying close attention to the vote on rates and language used in the minutes. We expect it to strike a more positive tone on the UK economy following the election result, which would likely provide additional support for the pound. This week is also littered with economic data in the UK, including retail sales (Thursday), the labour report (Tuesday) and inflation figures (Wednesday).

Trade truce reached, but long way to full agreement

Yesterday’s weaker-than-expected PMI data out of the Euro Area had little impact on the common currency, which continues to be driven largely by shifts in global sentiment more than anything else. While the services PMI continues to show signs of a rebound, rising back up to 52.4 from 52.0, the manufacturing sectors remains deep in contractionary territory, falling to 45.9 in December.

The euro has rallied around three-quarters of a percent in the past ten days or so, although it did give up a lot of its gains on Friday despite the positive UK election result and trade deal. The issue with the trade agreement is that investors see it as largely a trade truce rather than a full blown deal. As part of the deal, China has agreed to buy an additional $200bn worth of US goods in the next two years, with the US foregoing additional tariffs and rolling back previous ones. There does, however, still appear a long way to go before a full agreement can be reached, with Chinese officials appearing far less enthusiastic about the ‘phase one’ deal than President Trump.

We’ll also get a dump of macro data out of the US this week, with the most important probably being this Friday’s revised Q3 growth numbers. News on the Trump impeachment hearings will also draw investors attention this week.