Good morning,
As the majority of us, including most international markets, return to work for the first full week back, few would have predicted the levels of anxiety felt globally, as tensions in the Middle East reached their highest point since the 2003 invasion of Iraq.
While President Trump ramps up the rhetoric concerning additional targets, the mood from Tehran has been near explosive, with state-sponsored TV publishing a list of Trump-held properties around the world for Iranians to exact their revenge for the assassination of General Soleimani. Before most in the markets had time to take down the office Christmas tree, the Dollar index slipped 0.70% and spiked the price of gold up by some 3.90%, as investors rushed to house funds in more tangible assets. Naturally, when considering the region in which this is all playing out, the price of oil pushed above $70 a barrel, its highest point since the September Aramco oil field drone strikes in Saudi Arabia. All eyes will now fall on the hopeful de-escalation of the situation concerning further dollar direction in the short term; however, with the 2020 US election looming, it seems unlikely.
With meaningful data releases in the UK still relatively thin, the focus for the pound this week will likely fall on the meeting between Boris Johnson and new EU President Ursula von der Leyen at 10 Downing Street on Wednesday. This is the likely start point of the race to a free-trade Brexit deal by December 31st 2020, a deadline set by Boris, which has taken the shine off the pound since the election boosted it above 1.2000 on the euro and 1.3500 on the dollar.
In short, if the sounds coming from the meeting – possibly by way of a joint press conference – are good and signal progress form the offset, the pound should be able to inch higher and make a start on relieving the fear held in the market that a year is nowhere near enough time for his free-trade plan to work.
Have a great day.
Author: Joshua Haden-Jones, Senior Private Relationship Manager
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