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?

Brexit

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?

Spending Review

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?

PMIs

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

Date Time (GMT) Currency Event
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 Unemployment Claims
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

Date Company Event
23-Nov Prosus N.V. Q2 2021 Earnings
24-Nov Medtronic PLC Q2 2021 Earnings
23-Nov Naspers Interim results
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