Key Points From This Week

COVID Vaccinations Begin

Risk sentiment broadly improved this week as the first sets of COVID vaccinations began in the UK. This comes on the back of the UK government approving the drug last week. Pfizer is due to deliver around 800,000 doses of its drug over the coming weeks ahead of a broader rollout in the New Year. Canada became the second country to approve the Pfizer vaccine this week and is due to receive 249,000 doses this month and 4 million by the end of March. Overall, the country has ordered 20 million doses with the option to purchases 56 million more.

ECB Increases Stimulus

At the December ECB meeting held this week, the central bank added to its current stimulus measures by increasing the scope of its pandemic emergency purchase programme by EUR500billion. The move means the ECB has now extended its current asset purchases bandwidth to EUR1.85trillion with the programme due to run until at least the end of March 2022. Headline interest rates were all left unchanged for the time-being though the bank reiterated its message that it stands willing to act further as necessary.

Brexit Talks Running Out of Time

It was another rollercoaster week for Brexit trade talks. Sentiment was initially improved on the week by news that the two sides had agreed a compromise over the controversial Northern Ireland border issue which has been a major hurdle for talks. Traders were then focused on the meeting between Ursula von der Leyen and Boris Johnson. However, once again, these talks were seemingly unable to move the needle and tensions have arisen once again over EU demands for a contingency plan in the event of a no deal scenario.

Key Events Next Week

December FOMC

At the upcoming FOMC meeting next week the market is not looking for the Fed to ease further. With US fiscal stimulus back in focus the Fed is likely to remain in wait and see mode, especially given the current optimism around COVID vaccination. However, the fed is likely to guide that further easing remains a strong option in light of the ongoing pandemic.

December BOE

The BOE is not expected to ease further next week. However, downside risks are growing and with Dominic Raab warning that trade talks could break down this weekend, the BOE might be forced into action. The bank has previously warned that failure to agree a deal would be firmly negative for the UK. However, if talks continue next week, the BOE is likely to wait until after the deadline before action in the hopes a deal can be done.

December BOJ

In line with the broad expectations for central bank meetings next week, the BOJ is not expected to act further, however downside risks are clear. Inflation continues to remain at a subdued level and the COVID outbreak has recently begun increasing there once again with daily case hitting a record high. With this in mind, the forward guidance will likely remain bearish. The Japanese government has unveiled a new stimulus package this week which should take some of the pressure off the BOJ in the near term.

Keep an Eye On

Brexit Talks

If talks do break down as Dominic Raab has warned, this will most likely cause a lot of volatility for GBP and UK assets. Furthermore, should talks falter ahead of the BOE meeting, this would increase the likelihood of the bank easing further here.

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