Week Ahead (2 November)

W/C Monday, 2 November - Talks on future EU-UK trade deal reach critical juncture

Talks will continue this week between the EU and the UK on a post-transition period deal. The last week extensive talks took place in Brussels and London, with the European Commission President, Ursula von der Leyen, reporting that good progress has been made on outstanding issues, including trade and security negotiations. In a further sign that an agreement is in sight, it has been reported that a compromise on access for EU boats to UK waters may be close. A new EU proposal would see a decision on quotas deferred until a later date. However, disagreements remain to be ironed out on the issue of a level playing field for state aid. A dispute resolution mechanism must also be agreed, which von der Leyen said would allow either side to suspend aspects of the deal should the other be in clear breach of obligations. Charles Michel, the European Council President, said that the progress of the talks would be assessed this week and that European institutions wanted to begin the ratification process by mid-November should an agreement be reached.

As a deal appears to be drawing closer, the Irish government has discussed a potential waiver for Northern Irish exporters to allow them to continue to benefit from existing and future EU trade agreements with both the EU and the UK. Should no agreement be reached, several sectors of the Northern Irish economy could be badly damaged at the expiry of the transition period on 31 December.

Tuesday, 3 November - Manufacturing PMIs to be released

The composite manufacturing PMI for the Eurozone will be released on Tuesday, reflecting performance and confidence in the sector in October. September's results showed an acceleration in growth, posting 53.7, up two points from August's 51.7 when seasonal factors were filtered out. Growth was particularly reliant, however, on a buoyant German manufacturing sector, which hit its highest level for 26 months in September and accounted for over half of the Eurozone's growth over the month. Indeed, if Germany's results were excluded, output growth would have weakened to the lowest level since June.

This week's results are likely to show the early impacts of the new round of lockdowns and restrictions currently being implemented in Europe, which will no doubt damage confidence and impact on job losses.

Wednesday, 4 November - Eurogroup to meet, with the digital euro on the agenda

The Eurogroup of EU finance ministers will meet on Wednesday via videoconference. Alongside discussion on the Covid-19 pandemic and its economic effects, the group will hold a strategic discussion on the euro as a digital currency. The idea of a digital euro has already been investigated by the ECB, which has launched a public consultation on the issue which will be open for submissions until 21 January 2021.

It is understood that a decision on whether or not to pursue a digital euro will be taken by mid-2021, although a fully functioning and circulating digital currency is unlikely to be in place for a further five or six years. This would leave Europe playing catch-up with other jurisdictions which have already proposed the use of digital currencies. Indeed, China began trialling the use of a digital Yuan earlier this year. The Eurogroup may consider ways in which to speed up its roll-out.