"We shall never surrender"!
Happy Friday,
The famous speech of Winston Churchill containing the words "We shall never surrender" is the second of three major speeches given around the period of the Battle of France and was a clear message to do whatever it takes to win. Boris Johnson, as one of the biggest admirers of the wartime Prime Minster, knows the feeling too well to take calculated risks to get the win in the end. There are two major battle lines for Boris right now wich could lead to victory or catastrophic failure.
The first battle is the fight against the Corona virus and the right way out of the current standstill. Especially after more and more people are criticizing his government for acting too late, the plan for lifting the lockdown has now become vital for the survival of Boris Johnson. With the FTSE100 down 24.5%, an expected unemployment rate above 10% and the economy shrinking in a worse-case scenario of 30%, it seems only logical to focus on a quick way to start the economy again. However, listening to his press conference yesterday it was obvious of the dilemma he is facing, as he needs to find a way for introducing relaxation without driving up the death-toll, as this could mean his political end.
Due to the media occupation of Coronavirus we are easily forgetting the additional battle for the PM, Brexit. Currently the UK and the EU are still playing hard-ball, with both sides claiming to be prepared for leaving the table and accepting a hard Brexit. The EU is pushing for common standards on the environment, health and workers’ rights – the so-called level playing field. Currently both sides are admitting that a deal under the current timetable is very unrealistic and therefore the EU is willing to extend the transition period. Once again Boris Johnson has the difficult task to weigh-up between possibly losing face due to an extension or the economic consequences of a no-deal Brexit.
It will be interesting to see how Boris Johnson tackles both battle-grounds and if he is willing to take a calculated risk especially when the stakes are so high.
My thought of next week:
It is very likely that the market will have a closer look at the latest release of Central Bank decisions as well as the employment market. It is widely expected that the Bank of England will keep their interest rate level at 0.1%, therefore traders will have a closer look at the statement after the announcement to see what further tools the Bank provides to tackle the impact of the Coronavirus outbreak. The market is expecting that new Governor, Andrew Bailey remains dovish and hint that his central bank is prepared to do much more if need.
On Friday, not only Donald Trump will have a closer look at the employment numbers especially after last month's catastrophic outcome. It s very likely to see still yet more jobs removed. The American economy is forecast to have record lost of 20 million jobs taken, which would push the unemployment rate up to 14%, far above the 10% peak of the previous recession. However these numbers will not show the true impact of Corona on the employment numbers, as the survey was conducted in the second week of April, therefore we can expect that the "real unemployment rate" end of April is much higher, especially as the number of people applying for unemployment benefits has remained high the last two weeks.