• The pound sank Tuesday after UK Prime Minister Boris Johnson moved to change the law on Brexit and make it illegal for Britain to continue negotiations with the European Union after 2020.
• The pound was down 1.2% against the dollar and 1.5% against the euro at 1:20 p.m. in London.
• The losses looked set to wipe out the currency's postelection gains since Johnson's Conservative Party won a decisive victory late Thursday.
• "This sets up another cliff-edge and could create yet more months of uncertainty for investors just when we thought all was squared away," one analyst said.
• View Business Insider's homepage for more stories.

The pound sank Tuesday morning after UK Prime Minister Boris Johnson introduced legislation that would raise the risk of Britain crashing out of the European Union without a deal.

The pound was down 1.2% against the dollar and 1.5% against the euro as of 1:20 p.m. in London.

The prime minister on Tuesday moved to change the law on Brexit, making it illegal for Britain to continue negotiations with the EU after 2020. The losses would wipe out the currency's postelection gains since Johnson's Conservative Party won a decisive victory late Thursday.

The EU's chief Brexit negotiator, Michel Barnier, has warned that making a "comprehensive" free-trade deal would be near impossible by the end of 2020.

Johnson's move "means no possible way to extend the transition period," said Neil Wilson, the chief markets analyst at Markets.com. "I must confess to believing he wouldn't need to be so drastic, that a large majority offered the flexibility yet strength a government craves in deal-making."

That large majority, won in the UK election last week, was key to sending the pound surging as observers hoped for a clear Tory mandate and certainty about Brexit.

"This sets up another cliff-edge and could create yet more months of uncertainty for investors just when we thought all was squared away," he added.

For more on Johnson's plan, which is due to be put forward to the UK Parliament on Friday, click here.

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• The UK is set to leave the European Union at 11 p.m. London time on Friday.
• Sterling was trading slightly higher at $1.31 against the greenback in the morning.
• Analysts say this could be due to the Bank of England's decision Thursday to hold interest rates.
• Analysts told Business Insider that if the trade negotiations with the European Union succeeded, sterling could end the year near $1.38.
• The currency could fall back to $1.24, however, in case of a failed deal.
• Visit Business Insider's homepage for more stories.
• Watch the pound trade live.

The British pound was trading slightly higher on Friday morning as Britain prepared to leave the European Union.

Business Insider talked to numerous analysts and currency experts who saw the currency hitting close to $1.40 by the end of the year.

After 3 1/2 years of negotiations and political uncertainty, Brexit is set to take place Friday at 11 p.m. London time. While pro-Brexit campaigners will be busy celebrating Britain's exit from the European Union, traders and analysts will be busy watching the pound. 

Numerous analysts told Business Insider, however, that the initial reaction to the pound might be quite muted since the currency market had already priced in the exit. What comes next is the trade negotiations with the EU — and any uncertainty on that front could see the pound falling in the longer term.

"A 0.35% rise to $1.3139 puts the currency almost back to where it was at the start of the year, but still some way short of the $1.3335 level seen just after the general election result in December," Russ Mould, the investment director at AJ Bell, said in a research note on Friday.

The British pound has had a roller-coaster ride since the UK voted to leave the EU on June 23, 2016. The currency plunged from the highs of $1.50 to a 31-year low of $1.32 on the night of referendum and continues to trade 12% lower since then. 

Some analysts also said that the slight rise in sterling on Friday was on the back of a hawkish Bank of England rate hold on Thursday and that the year 2020 could be positive for sterling. 

"2020 will be an opportunity for the investor community to begin building sterling longs, in light of what could be a favorable turn in sentiment as the UK close the chapter on Brexit and look forward to a renewed future," Bethel Loh, a macro strategist at ThinkMarkets, told Business Insider. 

A close eye on March 3

While the UK continues to remain a member of the single market and customs union till the end of the year, the uncertainty now remains whether the two sides will be able to sign an agreement on the next steps. Investors will be keeping a close eye on March 3, when the UK and the EU are scheduled to start their trade talks. 

"There remains the threat of no deal and investors will be made acutely aware of this as the year progress — coming to potential mini-climax in June, when the two sides will need to be confident of agreement in time for Christmas," Neil Wilson, the chief markets analyst at Markets.com, said in his morning note.

Jeremy Stretch, the head of G10 FX at CIBC, said optimism over a trade deal needed to be kept in context. 

"For the year as a whole we do assume a higher value of Sterling by year end, but the near term outlook could prove challenging," Stretch said. "We anticipate that sterling will end the year at $1.38 but the gain is at least partly by virtue of a lower USD."

What happens if negotiations fail?

"I assume the negotiations will not fail, but rather we end up with something akin to the US and China deal, namely a phase 1 deal sealed in the time line with the thornier issues kicked down the road," Stretch said.

He warned, however, that if trade negotiations failed and the UK ended up with a delayed hard exit, "we would look for GBP USD to drop 5% to 7% taking us back towards $1.24."

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• A speech given by the Bank of England's deputy governor in July 2017 was leaked to a trader one hour and 16 minutes ahead of time, pushing the British pound higher, The Times of London reported on Wednesday. 
• Bank of England's accredited market news provider Livesquawk, leaked the draft of the speech, due to be made by Ben Broadbent, to a foreign-exchange trader, according to The Times of London.
• The pound rose initially on July 2017 as traders expected BOE's Broadbent to vote for a rise in interest rates.
• In December 2019, the BOE said it was investigating after a report that hedge funds paid for access to briefing broadcasts that the rest of the public heard on a delay, giving the traders early access to market-moving information.
• Visit Business Insider's homepage for more stories.

A speech given by the Bank of England's deputy governor in July 2017 was leaked to a trader one hour and 16 minutes ahead of time, The Times of London reported on Wednesday. 

The Times article claims that the Bank of England's accredited market news provider, Livesquawk, leaked the draft of the speech to a foreign-exchange trader.

Livesquawk, as an official partner, had access to early copies of the speech as well as other sensitive material from the Bank of England. 

The pound rose initially 0.4% against the dollar on July 2017 as traders expected BOE's Broadbent to vote for a rise in interest rates. However, the currency later fell by 0.2% against the dollar as the deputy governor offered no clues on the course of monetary policy. This according to Bloomberg.

"Anyone with early sight of the speech would have been able to trade the moves for profit. Proof that Livesquawk provided sensitive information to a trader supports separate claims seen by The Times that the company encouraged staff to break embargoes to give clients an 'edge'. The detailed allegations cannot be disclosed because they are part of court proceedings,"The Times story claims. 

The Bank of England told The Times it was not aware of a breach of embargo by Livesquawk. "The Bank removed Livesquawk's access to embargoed material in March 2018," a spokesman told The Times.

The Times story claims that a copy of the speech was sent by Livesquawk to a trader named Ryan Littlestone who blogged in 2019 that Livesquawk made him "plenty of pips by getting the fastest to a headline." Business Insider has not been able to independently verify these claims. 

Mr Littlestone, however, told The Times that Livesquawk's staff accidentally posted this speech in a private chat used for market commentary with the Livesquawk team and he realized it was done in error and did not "reprint, pass on any information in the speech or act in any way that would be deemed to be detrimental to the nature of Livesquawk's association with embargoed data or news."

Livesquawk was not immediately available for a comment when contacted by Business Insider. The company, however, told The Times of London that it took immediate action to rectify the situation. Meanwhile, the Bank of England told Business Insider that it did not have anything further to add to the story. 

This is the second report of Bank of England broadcasts getting leaked

This isn't the first time the Bank of England's clearance process has come under question. In December, 2019, the bank said it was investigating after a report that hedge funds paid for access to briefing broadcasts that the rest of the public heard on a delay, giving the traders early access to market-moving information.

The central bank discovered one of its third-party suppliers was misusing an audio feed of its press conferences and distributing it to high-speed traders, following inquiries by the Times of London.

The feed gave the traders a headstart of up to eight seconds on rivals watching the official broadcast, The Times reported. 

"We have recently identified that an audio feed of certain of the Bank press conferences — installed only to act as a back-up in case the video feed failed — has been misused by a third party supplier to the Bank since earlier this year to supply services to other external clients," the Bank of England said in a statement in December. 

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• The Bank of England has announced that it is cutting interest rates by a further 15bp taking the effective rate to 0.1%. 
• The bank's monetary policy committee also voted to buy £200 billion ($230 billion) worth of UK government bonds and investment-grade corporate bonds. The decision sent the pound soaring more than 0.5% from 35 year lows. 
• "The spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be sharp and large, but should be temporary," the Bank of England said in a statement. 

The Bank of England has announced that it is cutting interest rates by a further 15bp taking the effective rate to 0.1%. 

The bank's monetary policy committee also voted to buy £200 billion ($230 billion) worth of UK government bonds and investment-grade corporate bonds. The decision sent the pound soaring more than 0.5% from 34 year lows. 

"The spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be sharp and large, but should be temporary," the Bank of England said in a statement. 

The pound jumped 0.7% against the dollar to trade at $1.1716. On Wednesday, the pound slumped to a 35-year low as British Prime Minister Boris Johnson announced schools would closeuntil further notice starting Friday and news outlets reported a London lockdown was expected. 

This is the second rate cut from the Bank of England this month. Last week, the central bank cut interest rates by 0.5% as part of an emergency response to the growing economic impact of the coronavirus. 

"The move triggered a little bit of activity in the pound, which has come under considerable pressure over the last week or so, before settled around the pre-announcement levels," Craig Erlam, senior market analyst at Oanda Europe said in a note. 

"The rate cut is largely symbolic and highlights just how little room the Bank has to manouvre on the traditional side which the increase in the term funding scheme should provide additional relief to SMEs. Whether that will be enough to reduce layoff's and stop good businesses going bust, we'll have to wait and see. Both seem inevitable, even with all of this support," Erlam said.

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• A Brexit "endgame" may force a last-minute trade agreement between the UK and European Union, a chief strategist said on Thursday.
• "There is so much at stake for the UK" that failure to agree on a deal would deliver a major blow to the recovery in the economy, Jeffrey Kleintop, Charles Schwab's chief global investment strategist, told Business Insider.
• Prime Minister Boris Johnson will most likely strike a last minute deal in mid-to-late October, giving a significant boost to UK financials and the pound, he said.
• UK stocks have declined over 20% this year, sharply underperforming other European markets.
• Visit Business Insider's homepage for more stories.

The battle over Brexit is reaching an "endgame" and this could force a last-minute compromise between the UK and the EU, which could potentially boost UK equities and the pound, Charles Schwab's Jeffrey Kleintop said on Thursday.

If Conservative Prime Minister Boris Johnson avoids a "no-deal" Brexit, this will ultimately benefit UK financial stocks and the pound, and revive confidence in the economy's recovery.

"Final negotiation will be very important in terms of determining how successful the Johnson administration is on getting what they want out of Brexit," Kleintop told Business Insider.

Explaining why he thinks a surprise compromise will be reached, Kleintop pointed to how Johnson's government agreed to the withdrawal agreement in October last year that he and Theresa May had rejected only a few months earlier.

It was "kind of the same that was proposed all year and ultimately when it came down to the last minute, the UK gave in," he said.

"The same thing may happen this time. There is so much at stake for the UK, particularly with regard to providing financial services and a number of other key exports, that they will find a compromised solution at the last minute. I think this was an effort by Johnson to at least appear to be pushing for the most aggressive solution he could find favoring the UK."

The prospect of Britain leaving the EU at the end of the year without a trade deal in place has taken its toll on UK financial markets. The FTSE 100 is one of the worst-performing European stock indices this year, with a loss of 23%, compared with a 5% loss in Frankfurt's blue-chip DAX. 

With a 4% loss against the dollar this year, the pound is the worst performing G7 currency as well. Britain has suffered the highest death count in Europe from coronavirus, with around 41,000 dead. 

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Kleintop outlined three potential results of a last-minute trade deal between the UK and EU:

• A rally in UK stocks, and to a lesser extent EU stocks.
• Gains in UK financial stocks due to a lower risk of a reduced marketplace and negative yields.
• A rise in the pound as the prospects for negative yields fade.

Until a resolution in mid-to-late October, uncertainty over a trade deal and expectations that the Bank of England will shift to negative rates later this year will continue.  

"Failure to agree on a deal would deliver a major blow to the U.K. economic recovery," Kleintop said in a note.

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European shares edged up on Tuesday, defying pressure from a surge in coronavirus cases across the region, while a deadline later in the day for US lawmakers to vote on another round of economic stimulus made investors wary of betting too heavily in one direction or another.

The third-quarter earnings season picks up in earnest this week. Swiss investment bank UBS on Tuesday reported a 99% increase in net profit between July and September, driven by a surge in both its trading and wealth management businesses.

In Washington DC, Republicans and Democrats remain at odds over the details of another round of measures to help bolster the economy and the chances that the two sides will pass a bill before the November 3 election appear to be dwindling. 

House Speaker Nancy Pelosi set a deadline for Tuesday to pass a $2.2-trillion Democrat-backed bill. She and Treasury Secretary Steven Mnuchin held multiple talks over the weekend on a deal, but the two sides remain far apart, which stripped over 1.5% off the three major indices.

"All in all, a fresh stimulus bill before the elections remains far from certain and we suspect there is not much of it currently being priced in by the markets, which should keep the downside for risk assets relatively limited if prospects of a bipartisan-deal eventually collapse. This should be the main driver for global markets today," ING strategist Chris Turner said. 

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The Stoxx 600 traded almost unchanged on the day, as gains in retail and health care stocks were offset by losses in natural resources and oil and gas stocks. UBS was one of the top gainers among the banking sector, rising by 2.3%.

The FTSE 100 gained 0.2% on the day, lifted by the likes of supermarket chain Tesco and clothing retailer Next, while Paris' CAC 40 rose 04% and Frankfurt's DAX slipped 0.3%.

The VDAX-New, an index of options volatility on the DAX, rose nearly 2.5%, reflecting growing investor nervousness. 

Cases of coronavirus are surging in many large European countries. In the UK, the Welsh national government instituted a two-week "circuit-breaker" lockdown across the country, while in Ireland, the government said it would close much of the economy and impose tough restrictions on movement to stem the spread of the disease.

With risk aversion rising, the dollar index edged up around 0.1%, mainly driven by losses in the pound, which eased, after the British government dismissed efforts by European Union negotiators to resume negotiations over post-Brexit trade this week. 

"A bit like the US fiscal stimulus, this is now a political dance. We hope no one stumbles!" Deutsche Bank chief strategist Jim Reid said in a note Tuesday.

The pound slipped 0.5% against the dollar to $1.2943 and by 0.1% against the euro to 0.9092 pence.

Futures on the S&P 500, the Dow Jones and the Nasdaq 100 were up between 0.4% and 0.8%, suggesting investors may focus instead on earnings later in the day as a more immediate catalyst. 

Technology firms Netflix and Snapchat, as well as consumer goods producer Procter & Gamble, tobacco group Philip Morris and defense group Lockheed Martin are among those reporting quarterly earnings.

In the commodities sector, a slightly stronger dollar ate into demand for the likes of gold, which fell 0.4% to around $1,904 an ounce, but analysts said the price could well stage a bounce back, particularly in the even of a deal on US stimulus.

"This evening will apparently determine whether the aid package can be approved before the presidential elections in two weeks' time, so the market will no doubt follow the talks in Washington very closely," Commerzbank said in a note. "Gold could profit in the event of a deal because the US dollar would presumably be in less demand then and would probably depreciate."

Meanwhile, the rise in cases of Covid-19 around the world weighed on crude oil. Brent crude futures fell 0.4% to around $42.50 a barrel, while WTI futures fell 0.1% to $41.02 a barrel. 

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Global shares rose on Monday, helped in part by a surprisingly big improvement in Chinese economic data and as investors pared back some of last week's bearish positions, despite another national lockdown in England and the growing nervousness over Tuesday's US election.

Futures on the S&P 500, Dow Jones and Nasdaq 100 rose between 0.3 and 0.5%, pointing to a stronger start to trade after the opening bell on Wall Street later. On Friday, the S&P closed with its steepest weekly drop since mid-March, pummeled by an investor exodus from risk-linked assets such as stocks and commodities. 

In the Real Clear Politics national polling average, Democratic presidential nominee Joe Biden maintains a steady 7.2% lead over President Donald Trump, with Biden is averaging 51.1% of the vote, compared to Trump's 43.9%.

China's factory sector saw activity expand at its fastest pace in almost 10 yearsin October, thanks to a surge in domestic demand, although the spike in cases of COVID-19 in some of its biggest customer nations in Europe curbed exports.

In Europe, the Stoxx 600 rose 1%, boosted by an 8% rise in shares of British online grocer Ocado, which said it would buy two robotics firms. The company, which has only a fraction of the UK groceries market, is its most valuable, thanks to the surge in online shopping in the face of lockdown restrictions.

Among the regional indices, the mood was upbeat, with Amsterdam's AEX and Vienna's ATX benchmarks up 0.7%, along with London's FTSE 100, which profited from a 0.5% drop in the value of the pound, as investors in UK markets prepared for another lockdown across England this week.

"Clearly the US elections this week are likely to be a pivotal driver for equities. We have shown  in  recent  work  that  European  equities  are  one  of  the  regions  most  exposed  to  the improvement in the polls for Biden," UBS equity strategist Nick Nelson said in a note.

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Conservative prime minister Boris Johnson is expected to seek approval from the British parliament for a one-month lockdown to come into effect on Thursday across the whole of England, which is home to nearly 90% of the entire UK population, to curb an alarming spike in cases of COVID-19, which he said on Saturday was more severe than the government's reasonable worst-case scenario.

The pound fell 0.4% against the dollar and the euro, making it the worst-performing G7 currency of the day. 

"On the growth outlook, a fourth-quarter contraction is now probable. November GDP will likely plunge by 6% to 10% m-o-m, as a result of tighter restrictions," Deutsche Bank analyst Sanjay Raja said. 

The UK has the worst death rate in Europe, with nearly 45,000 fatalities so far. The eurozone has seen large swathes of the population put under renewed restrictions, including France, Germany and Spain and economists are predicting a drastic decline in overall activity.

UBS has cut its annualized growth forecast for the eurozone to 3% from 8% for the fourth quarter of the year.  

Oil has fallen to its weakest in five months, as mobility restrictions have increased across much of Europe, which is biggest driver of demand for diesel fuel. 

The price of a barrel of Brent crude oil fell on Monday by 2.4% to $37.02 a barrel, while US crude futures dropped 2.7% to $34.80 a barrel. 

Production of oil outside of the Organization of the Petroleum Exporting Countries is rising. Output from Norway's largest oilfield is set to reach a record high of nearly 500,000 barrels per day soon, while production in Russia and the United States is edging higher, along with Libyan oil output, which has doubled in recent weeks, thanks to the cessation of violence between warring factions.

"Right now, there is a lot of immediate pain in the oil market with rising supply from Libya, weakening demand in Europe due to C-19 lock-downs and muted orders for crude from tea-pot refineries in China," SEB analyst Bjarne Schieldrop said. "All with US election worries on top. In terms of a potential Biden-win and the bearish impacts from that we think that it is all more than price into the market."

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The Bank of England on Thursday predicted far more severe damage to the UK economy this year than it previously anticipated, prompting it to expand its asset purchases to shore up overall activity in light of renewed lockdowns to stem the spread of coronavirus.

The economy is now expected to contract by 11% in 2020, compared with a forecast for a decline of 5.4% back in August, the BoE said in its November monetary policy report.

It predicted the economy will bounce back more robustly over the course of next year than it thought three months ago. The BoE expects growth to expand by 11% by the fourth quarter of 2021, up from its August forecast of 6.2%.

The BoE unanimously agreed to keep benchmark interest rates at 0.1% and to increase its quantitative easing program by a little more than most analysts were expecting, by £150 billion ($195 billion) to $895 billion ($1.165 trillion), compared with expectations for an increase of £100 billion ($130 billion).

"The outlook for the economy remains highly uncertain. It is dependent on the evolution of the pandemic and the measures taken to protect public health," the BoE said in its report. "It will also depend on how governments, households, businesses and financial markets respond to those developments."

"The injection of cash into the economy by the BoE comes as the UK enters its second lockdown and amid a weakening in the broader economy," CityIndex analyst Fiona Cincotta said.

"Risks to the recovery are skewed to the downside – not that surprising when you consider that a no trade deal Brexit could be happening in lockdown. How long it would take the British economy to recover from a mess like that remains to be seen," she said.

The pound rallied on the news, rising off the day's lows against the euro and reversing losses against the dollar to rally. Sterling was last steady against the euro, around 90.24 pence, while against the dollar, it was up 0.2%, having been down as much as 0.4% prior to the report.

"Risks to UK economic outlook and sterling remain very much to the downside in light of the four-week lockdown in England taking effect today, albeit cushioned by the extension of the Treasury's furlough program," Axi chief market strategist Stephen Innes said.

The central bank did not discuss deploying negative interest rates, but said it stood ready to take whatever action it believed necessary to prevent a worse downturn in activity and to bring inflation closer to its 2% target, as the pandemic has now confined most of the UK population to their homes and closed non-essential businesses for a month. 

"If the outlook for inflation weakens, the Committee stands ready to take whatever additional action is necessary to achieve its remit," the BoE said. "The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably."

Around 80% of the UK population are back under lockdown from Thursday, after the government announced at the weekend it would impose tough measures across the country to stop the renewed spread of COVID-19.

The UK already has the worst official death rate in Europe from coronavirus, with over 45,000 fatalities. The Office for National Statistics says total deaths are around 60,000 higher than average, meaning that the actual death toll could be far worse.

The UK economy was also one of the worst-hit when the pandemic first broke out in Europe. 

The Bank of England brought forward the timing of its rate decision to avoid clashing with Rishi Sunak, finance minister, who will give an update on the government's furlough scheme later in the day. The program had been due to expire at the end of October, but the resurgence of COVID-19 cases and another impending lockdown means it will now last through to December. 

Schools, colleges and universities will stay open during the four-week lockdown, but all nonessential businesses, including restaurants, pubs and bars, will close.

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Global equity indices fell on Tuesday, as investors booked profits on the vaccine-inspired rally to record highs following drugmaker Moderna's announcement the day before on the effectiveness of its rival offering to that of Pfizer.

A raft of restrictions on movement across the United States to help stem the spread of the virus that has already infected over 11 million people and killed more than a quarter of a million neutralized some of the euphoria that lifted markets this week. 

Futures on the S&P 500 and the Dow Jones were down between 0.3-0.4%, while the Nasdaq 100 diverged, rising 0.3%, as some of the technology stocks that were sold down fairly heavily on Monday recovered some ground.

The Dow Jones posted the first record close since February on Monday after Moderna said its vaccine candidate had proven to be 94.5% effective in clinical trials and, crucially, was easier to transport and store than rival Pfizer's vaccine. 

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"News in recent days that two coronavirus vaccines have proved to be highly effective in late stage trials has boosted risk sentiment driving demand for stocks higher," CityIndex analyst Fiona Cincotta said in a note on Tuesday.

"The fact that there is now light at the end of the Covid tunnel and an exit strategy from this health crisis and economic crisis has given investors plenty to cheer. However, it is also impossible to ignore the current covid backdrop. Sharply rising cases, tightening lockdown restrictions could quickly knock the fragile economic recovery off course well before the vaccine is being widely distributed," she said.

In Europe, the Stoxx 600 eased by 0.1%, as declines across the so-called "real economy" sectors, such as banks, construction stocks and energy companies weighed on some of the regional indices. 

The FTSE 100 fell by 0.5%, while Paris' CAC 40 and Frankfurt's DAX fell by around 0.1%. Overnight, Chinese blue-chips fell by 0.2% in Shanghai, while Tokyo's Nikkei rose 0.4%.

Shares in electric carmaker Tesla rose by around 11 in premarket trading, after a decision on Monday by S&P Global to include the stock in the S&P 500 from December. 

Beyond the stock market, the dollar index fell by 0.2%, reflecting gains in the pound and the euro, which rose 0.2 and 0.1%, respectively. Against the offshore yuan, the dollar fell 0.2%, while against the Mexican peso, it rose 0.6%. 

Yields on the benchmark 10-year Treasury were steady around 0.90%, around their highest since March, reflecting the investor push out of safe-havens that has sent gold to its lowest since July this month. 

In the commodity markets, gold traded roughly flat on the day, around $1,887.75 an ounce. The price has fallen by around 1% so far this month, in light of the progress towards an effective COVID-19 vaccine. 

The oil price edged up modestly, leaving Brent crude futures up 0.1% at $43.89 a barrel, while WTI crude futures rose by the same amount to $41.37 a barrel.

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• The pound fell 1.3% against the dollar on Monday after Prime Minister Boris Johnson signalled he might pull out of a Brexit trade deal over EU demands.
• Investors were readying for an imminent trade deal between the UK and EU over the weekend.
• But negotations failed to break the deadlock, fueling fears over a no-deal Brexit.
• "Things can go horribly sideways pretty quickly if EU members pack their bags and go home or PM Johnson leaves the negotiating table," a chief market analyst said.
• Visit Business Insider's homepage for more stories.

The pound slid against the dollar on Monday as investors considered the risks of the UK leaving the European Union without a trade deal.

Marking its worst slide in three months, the pound fell 1.3% to around $1.30 as of 1:10 p.m. GMT. London's benchmark FTSE 100 traded up by 0.3% in afternoon trading.

Investors were hoping for progress towards a trade deal over the weekend. But Boris Johnson looks likely to prepare for a no-deal transition within 48 hours from Monday if negotiations over key issues remain deadlocked, according to The Sun.

Talks are to resume later Monday, with Johnson and European Commission President Ursula von der Leyen speaking on the phone in the evening.

The UK economy is particularly dependent on its services sector and has leaned on the EU for trade to a large extent. One of the issues both sides can't seem to agree on is the level of access for EU boats to seas within the UK's exclusive economic zone.

Chatter over a breakthrough deal on fishing rights still hangs in the balance, however, as chief Brexit negotiator Michel Barnier and other officials have denied any agreement. 

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"As ever, rather than fish, the crucial issue is state aid and the procedure if there were any disputes on whether the UK had broken agreements," said Stephen Innes, chief global market strategist at Axi. 

"The market is completely underhedged for a breakdown in Brexit talks," he said. "Things can go horribly sideways pretty quickly if EU members pack their bags and go home or PM Johnson leaves the negotiating table."

It seems unlikely that any agreement will be ironed out on Monday, meaning that talks will probably drag into the rest of the week, according to Innes. No agreement would be preferable for Johnson as that would leave all the economic damage blamed on the EU with Brexiteers on his side, the analyst said.

Even with a trade deal in place, it is likely there will be disruption at the UK borders once the Brexit transition phase ends on December 30, according to Rabobank analysts.

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European equity indices rose on Thursday, ahead of a European Central Bank meeting that is widely expected to yield more monetary stimulus for the euro zone, while a sober read on the UK economy and ongoing Brext talks hit the pound.

The ECB has signaled it will expand its existing arsenal of asset-purchase programs to keep credit flowing easily to lenders, businesses and households, given it believes the eurozone risks more sustained damage from the coronavirus crisis, even as a vaccine is rolled out. 

Economists expect a top-up of at least €500 billion ($600 billion) to the central bank's existing €750-billion ($907 billion) pandemic emergency purchase program (PEPP) and for this and other measures to be extended by a minimum of six months. 

"One thing the ECB could do is extend the PEPP by a further 6-12-months into 2022, an extension of QE, if you like, and possibly increase the amount by €500bn, but anything beyond that could see splits on the governing council, with a number of members pushing back against further large-scale stimulus measures," CMC Markets chief strategist Michael Hewson said.

"Today's meeting is also likely to be important in the context of trying to keep a lid on the euro, which has already broken above the $1.2000 area, and could well head towards the $1.2500 area in fairly short order," Hewson said.

The euro rose fairly broadly, gaining against the dollar, the yen and the Chinese yuan. The single currency is tied with the Swiss franc for the position as 2020's best-performing major currency, with a gain of 8% each. Since April, the euro has gained around 13% against the dollar, compared with a 10% rise in the Swiss franc.

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The Stoxx 600 was flat on the day, but set for a gain of 0.9% this week, while the DAX rose 0.1%, Madrid's IBEX rose 0.2% and the CAC-40 gained 0.3%. Asian stocks were mixed, with Chinese benchmarks up around 0.1%, while the Nikkei fell 0.2% and the KOSPI lost 0.7%.

US stock futures nudged higher, suggesting the major indices will open modestly in the green later in the day. Futures on the S&P 500, the Dow Jones and the Nasdaq 100  traded between flat and 0.3% up on the day.

Meanwhile, data earlier showed the UK economy grew for a sixth month in October, but by just 0.4%, the slowest rate of expansion in six months. Over the three months to October, activity grew by 10.1%, in line with expectations, but the economy is still 7.9% below where it was in February and is expected to shrink further, as COVID-19 forces repeated shutdowns. 

"Unsurprisingly, October GDP marks the post-April peak in output before GDP falls back in when we get the November figures, reflecting the month-long lockdown across England," ING analyst James Smith said.

"We're expecting something in the region of a 7% fall in GDP on the month," he added.

Conservative prime minister Boris Johnson on Wednesday met European Commission president Ursula von der Leyen to try to work through the remaining hurdles to a trade deal after the United Kingdom fully leaves the European Union on December 31. 

Talks finished without any kind of resolution, and will resume at the weekend. There are still major gaps between the two sides, with fishing being a major sticking point. 

The pound tumbled, falling against all major currencies. Against the dollar, the pound lost 0.5%, while against the euro, it fell 0.8% and against more economically-sensitive currencies, such as the Australian and New Zealand dollars, it dropped around 1%. The FTSE 100 rose by 0.5%, making it the top-performing benchmark in the region, thanks in part to the weakness in the currency.

"Deadlines have come and gone, and it appears the market will be tolerant of more slippage on the deal's timeline, and I suspect even into 2021," Axi chief market strategist Stephen Innes.

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• The pound rose by as much as 1.6% against the dollar, after the deadline for Brexit trade talks were extended following a constructive discussion between British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen.
• Chief Brexit negotiator Michel Barnier said on Monday a deal could be reached as soon as this week, if both sides compromise on fishing.
• A no-deal Brexit is unlikely because the UK would have to deal with immense economic costs, a strategist said.
• The pound's rise is set to continue after an extension to talks suggest there is plenty of room for volatility in the near-term, Rabobank analysts said.
• Visit Business Insider's homepage for more stories.

The pound rose against the dollar on Monday as investors breathed a sigh of relief after the UK and the European Union extended the deadline for Brexit talks on Sunday.

The currency was on track for its best day since mid-March, rising by around 1.6% to $1.346 as of 11:05 a.m. GMT. London's FTSE 100 traded up around 0.3%, making it one of the weakest performing indices in the region, compared with the 1% gain in the Stoxx 600.

British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen agreed on Sunday to "go the extra mile" in search of a Brexit agreement before the transition period ends on December 31, to avoid the UK tumbling out of the single market and into the economic and financial unknown. Johnson said both sides were still "very far apart", but that "the UK certainly won't be walking away from talks."

Chief Brexit negotiator Michel Barnier told EU ambassadors on Monday that a deal could be reached as soon as this week if both sides find a compromise on fisheries, according to the Telegraph.

A no-deal Brexit is unlikely given the economic costs for the UK would be too high and political support for Johnson would be adversely impacted, David Roche of Independent Strategy told CNBC.

Against the euro, which reflects investor confidence in the Brexit process, the pound gained 1% on the day, set for its largest daily increase in over two months.

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"As long as the two sides are talking, there remains the belief that common sense will prevail and a deal will be reached that avoids the cliff edge on January 1st," said Craig Erlam, a senior market analyst at OANDA.

Sterling was up against the Chinese yuan, the Japanese yen and the Canadian dollar, gaining between 1.3 and 1.5% on the day, as growing confidence drew investors back towards UK assets.

Eurozone indices were also buoyed by the recent developments. Frankfurt's DAX and the benchmark French CAC 40 index both rose 0.8%.

The strength in the pound is set to continue over the coming days, as the extension to talks suggests there is plenty of room for volatility in the near-term, Rabobank analysts said.

If financial markets and betting markets are thinking alike, the pound would probably fall to about €1.04 ($1.26), 7% below its early November level, if no-deal came to pass, said Sam Tombs, chief UK economist at Pantheon Macroeconomics. Conversely, the pound might rise to €1.14 ($1.39) if a deal is signed off and appears to be durable.

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Global equities, gold and the pound rose on Wednesday, despite President Donald Trump stunning markets by signalling he may refuse to sign off on the stimulus bill, which took months to agree. 

US stock futures were up between 0.2 and 0.3%, suggesting a modestly higher start to trade later. In Europe, most major indices gained after France softened its stance on people and freight entering from the UK, where millions are under lockdown after the emergence of a more contagious strain of COVID-19. 

Trump on Tuesday criticized the $900 billion COVID-19 relief package passed by Congress. 

In a video, he conflated the bill with another measure funding the federal government, criticizing the inclusion of foreign aid, and said the $600 stimulus checks were too small. He asked Congress to increase the amount to $2,000.

IG analysts said in a note: "It has been widely recognised that a $600 per person direct payment will do little to boost the economic outlook, and Trump has called for an enhanced payout closer to $2000. Should he succeed this would no doubt provide a boost for markets, yet there is also a chance his opposition could take us back to square one." 

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With a series of COVID-19 vaccines in the works, the stock market has rattled back to record highs this month, as investors anticipate how mass immunization will help economic activity return to more normal levels in 2021. 

But the prospect of another generous stimulus package for the US economy has been a key catalyst for the strength in the markets. 

Meanwhile, in Europe, the STOXX 600 rose 0.2%, led by gains in retail and telecommunications shares. Frankfurt's DAX was up 0.5%, boosted by gains in shares of automaker Daimler, while London's FTSE 100 was one of the regional laggards, down 0.3%, on account of a relief rally in the pound after the easing of travel restrictions.

The pound gained fairly broadly, rising 0.5% against the dollar, by 0.3% against the yen and rising 0.2% against the euro. Sterling has risen by 0.5% against the dollar so far this month, even with the clock ticking down towards the UK's full exit from the EU on December 31. But its gains have been eclipsed by those of the euro, which has risen by 2.5% against the greenback. 

Britain, which has the highest COVID-19 death rate in Europe, is still in talks with the EU over trade once it leaves the single market, even though the public referendum on Brexit took place nearly five years ago.

"Fishing continues to be a stumbling block and the clock is ticking as the transition period ends in over one week. Yesterday afternoon there was talk of a 'final push' being attempted it was the sort of rhetoric that we have heard before," CMC markets analyst David Madden said.

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On the commodity markets, precious metals got a lift from a decline in the dollar, which boosted gold by 0.3% and silver by nearly 1% on the day. 

With the prospect of mass vaccination and economic recovery a reality, gold has struggled to retain its popularity among investors, given that it often serves as a safe-haven in times of economic, or financial-market, stress. 

However, the tumble in the dollar has given some support to gold, as investors typically take advantage of weakness in the US currency to divert their into dollar-denominated assets. The gold price is on course for a gain of nearly 5.5% in December, its first monthly increase since July.

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Global shares headed lower in holiday-thinned trading on Thursday, bringing an end to a tumultuous year dominated by the coronavirus pandemic that has driven stock markets to record highs and brought a return to the kind of volatility seen a decade earlier in the financial crisis.

The turbulence that upended financial markets in the early stages of the pandemic has subsided. The rollout of COVID-19 vaccines around the world has assuaged a lot of the concern about the economic outlook in 2021, although surging caseloads in the US and across Europe in particular, as well as a more contagious new variant of the virus have dented some enthusiasm in the shorter term. 

Much of the political uncertainty that shrouded the financial markets earlier in the year has also lifted. A decisive outcome to a highly contested US presidential election, as well as a last-gasp deal on Brexit between Britain and the European Union have pushed global equities to their strongest fourth-quarter performance in 17 years.

The MSCI All-World index has gained 14.1% this year and 13.2% in the final quarter of 2020, making this its largest gain in the final three month of the year since 2003. 

"The central focus for markets heading into 2021 is how economies will be able to recover from the pandemic by rolling out vaccines and relaxing restrictions," CityIndex strategist Joshua Warner said.

"Confidence has grown in recent months as both the UK and the EU started to vaccinate their populations, although surging cases and hospitalizations shows most countries are still not out of the woods," he added.

A number of large stock markets, such as Japan and Germany, were closed for New Year's Eve, which drained already-thin trading conditions even further.

The FTSE 100, which will cease trading at 1230 GMT/0730 ET, was last down 1.3% on the day. Millions more were plunged into the toughest restrictions on activity at midnight on Thursday, bringing the total of those living in near-lockdown to 44 million in England alone. 

Paris' CAC 40 and Madrid's IBEX 35 index traded down by 0.6% and 0.5%, respectively.  

US stock futures teetered either side of unchanged, suggesting a steady start to trade later on. 

All three major indices have hit record highs this year, with the S&P 500 having gained 15.5%, the Dow Jones up 6.6% and the NASDAQ up a whopping 44%, thanks to double- and even triple-digit percentage gains in some of the world's biggest technology stocks, such as Apple, Amazon and electric vehicle maker Tesla. 

The most recent catalyst for the push higher in US stocks has been an end to months of wrangling over another round of financial aid to American households and businesses. Stimulus checks for $600 could start arriving in people's mailboxes this week, according to US Treasury Secretary Steve Mnuchin.

Meanwhile, at 2300 GMT on Thursday, Britain will officially part ways with the European Union, after negotiators on the two sides reached an eleventh-hour agreement on trade that UK lawmakers approved in a special session on Wednesday.

The pound, which is the worst-performing major currency of 2020, edged higher, gaining 0.2% against both the dollar and the euro, and rising by 0.5% against the Chinese yuan. 

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"Thin volumes are likely today, with traders continuing to balance the benefits of a breakthrough in US stimulus and Brexit talks with the expectation of near-term economic suffering as the virus continues to spread," analysts at broker IG said in a note.

The Shanghai Composite closed up 1.7%, bringing its gains for the year to 13.4% while the MSCI Asia index, which excludes Japan, finished 1.9% higher, closing 2020 with an increase of 19.8%.

The dollar has fallen by 7% against a basket of major currencies in 2020 to its lowest since April 2018, dented by the swell in investor risk appetite in the fourth quarter particularly, thanks to a lot of political uncertainty clearing up, as well as the rollout of a series of vaccines against COVID-19.

Gold has risen by almost a quarter in value this year, having touched a record high above $2,000 an ounce in early August, fueled by investors seeking an alternative to stocks and bonds, and by the collapse in US interest rates. 

Gold was last up 0.2% around $1,896.30 an ounce, while silver rose 0.2% to $26.62 an ounce.

Oil, which has gained 25% this quarter, driven by the prospect of economic recovery and an improvement in energy demand in 2021, has lost 20% in value this year and the price has struggled to make much headway above $50 a barrel. 

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Brent crude and WTI crude futures both fell by around 0.5% to $51.35 a barrel and $48.20 a barrel, respectively. Both contracts have recovered most of their losses since the onset of the coronavirus pandemic in February.

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Global stocks rose on Monday, kicking off the new year with a dose of optimism over the economic recovery that many investors hope a COVID-19 vaccine will bring, while Bitcoin traded near record highs above $30,000 and gold and oil rallied.

A flurry of upbeat manufacturing activity reports from China, Japan and India pointed to ongoing recovery in some of the world's largest economies, which helped underpin positive sentiment. 

Giving an extra shot in the arm to risk assets was the ongoing decline in the US dollar, which investors sold in favor of stocks, commodities, cryptocurrencies and emerging-market currencies.

"The year has started very much the same as the previous year ended: risk up and the dollar down," Axi chief market strategist Stephen Innes said.

In vaccine-related news, the UK became the first country to approve use of the University of Oxford and AstraZeneca's candidate, ahead of a probable tightening of restrictions given the explosion in cases over the past couple of weeks, while the Japanese government considered  a new state of emergency for Tokyo and surrounding areas. 

US stock futures rose broadly, gaining between 0.4% and 0.5%, indicating that more all-time highs for the S&P 500, the Dow Jones and the NASDAQ may be on the cards later in the day when regular trading resumes after a hiatus since Thursday.

Politics remain front and center for US markets, ahead of the first major risk event of 2021 — the rerun of the Georgia Senate election. If the two seats up for grabs pass to the Democrats, this could spell more weakness for the US dollar, analysts said.

"Any surprise win for the Democrats here could raise concern of greater regulatory oversight for the US tech sector and prompt some position adjustment in US equities," ING global head of markets Chris Turner said.

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The dollar index was last down 0.5% on the day, trading around its lowest since April 2018, and slid 1.1% against the Chinese yuan to its lowest since mid-2018, and fell 0.4% against both the Japanese yen and the Thai baht. Asian benchmark stock indexes closed mostly higher, with the Shanghai Composite and Hang Seng gaining 0.9% and the KOSPI rising 2.8%. Japanese stocks were the exception, given the potential for a state of emergency in the capital, which stripped 0.7% off the Nikkei.

"From economic and fundamental standpoints, there are good reasons for Asian currencies to catch up. For one, we expect economic growth in Asia to reach a brisk 8.2% in 2021 with the help of favorable base effects," UBS Global Wealth Management analysts Dominic Schnider and Teck Leng Tan said in a note.

In Europe, the "real-economy" sectors led the push higher, with basic materials, construction and chemical stocks all gaining, in spite of rising infection rates in the region and the threat of tougher, longer lockdowns in the UK and Germany. 

On the first trading day since the UK formally left the European Union's orbit, the FTSE 100 was the best performing index in the region, rising by nearly 2% on the day, compared with a gain of 0.9% in the broader STOXX 600. 

Conservative Prime Minister Boris Johnson on Sunday said lockdown restrictions would likely get more severe over the coming weeks. The explosion in cases due to a new, more contagious variant of the virus has prompted school closures and a return to remote learning for part of January in London and parts of the south east. 

The pound traded steadily against the dollar and marginally lower against the euro, falling 0.2%. 

"The greenback remains an unloved currency on the first trading day of 2021. Low interest rates and an improving economic outlook following vaccines rollout has led to further short selling in the US dollar, particularly against the euro and Chinese yuan," FXTM analyst Hussein Sayed said in a note. 

Bitcoin, which on Sunday hit a record $34,800, was last trading around $31,060, down around 10%. The price is still double what it was just over a month ago.

With the dollar languishing around its lowest in nearly three years, gold rallied 2% to trade around two-month highs close to $1,940 an ounce, while silver rose 3.7% to around $27.48 an ounce. 

"Gold is the standout mover today, hitting its highest level since Nov 9. The move looks more reflective of a "risk-on" stimulus trade via a softer dollar than anything else," Axi's Innes said.

Oil, which last year lost more than 20% in value thanks to the biggest destruction in energy demand on record, rose sharply. Brent crude futures rose 2.4% to around $53.03 a barrel, while US futures gained 2.2% to reach $49.59 a barrel. 

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The British government on Tuesday announced a new financial aid package worth almost £5 billion for businesses most affected by the most recent lockdown aimed at curbing the spread of an aggressive new variant of the COVID-19 virus.

The UK has entered another national lockdown, including school closures, in light of the emergence of a new strain of COVID-19 that has prompted record rates of infection and a spike in fatalities that Conservative Prime Minister Boris Johnson said on Monday night risked overwhelming the health service.

The Treasury said it would pay one-off grants worth £4.6 billion ($6.2 billion) to businesses in the retail, hospitality and leisure sectors to support them through the coming weeks of full lockdown. 

Chancellor Rishi Sunak said the aim was to help sustain jobs to ensure workers could be ready to return when the economy reopened.

"The new strain of the virus presents us all with a huge challenge - and whilst the vaccine is being rolled out, we have needed to tighten restrictions further," Sunak in a statement.

"Throughout the pandemic we've taken swift action to protect lives and livelihoods and today we're announcing a further cash injection to support businesses and jobs until the spring," he said.

Britain has the worst COVID-19 death rate in Europe, with around 75,000 fatalities. 

The Treasury said the grants would be worth up to £9,000 ($12,200) per property in the sector, with a £594 million ($806 million )discretionary fund also made available to support other impacted businesses. 

The government late last year extended its existing furlough scheme until the spring.

The pound ticked higher against the dollar after the announcement, to trade 0.1% higher on the day around $1.3582.

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The UK unemployment rate hit its highest level in 5 years in the three months to November, official figures showed on Tuesday, although the government's wage-subsidy scheme kept joblessness lower than in other countries.

Unemployment rose to 5% over the period, the Office for National Statistics said, up from 3.8% a year earlier and 4.9% in the three months to October. It was the highest figure since early 2016 but below analysts' predictions of 5.1% in a Reuters poll.

Separate figures from the ONS showed that there were 828,000 fewer payroll employees in December 2020 than in February the same year.

The pound slipped 0.23% against the dollar to $1.364 in early trading. The FTSE 100 stock index climbed 0.64%.

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"This crisis has gone on far longer than any of us hoped – and every job lost as a result is a tragedy," said chancellor Rishi Sunak.

"Whilst the NHS is working hard to protect people with the vaccine we're throwing everything we've got at supporting businesses, individuals and families," the finance minister said.

Sunak's furlough scheme, which pays the wages of workers who would otherwise be laid off due to the coronavirus pandemic, has held down the headline unemployment rate.

The latest figures showed that the scheme supported 2.4 million jobs as of October 31. It has supported more than 9 million jobs since being launched in the spring of 2020.

Sunak was initially reluctant to extend the scheme past the autumn, thanks in part to its cost of more than £46 billion ($63 billion).

But England entered another lockdown in November and the four nations of the UK tightened restrictions again in January, forcing Sunak to extend government support. Coronavirus cases soared in December and January, with the UK's death toll of 100,000 the highest in Europe.

Britain's unemployment rate of 5% in November compared to 6.1% in Germany in the same month and 6.7% in the US in December.

However, Bank of England governor Andrew Bailey earlier this month said he thought joblessness was in fact higher. This is because the official figures do not count people who have stopped looking for work as unemployed.

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Karen Ward, chief market strategist at JPMorgan Asset Management, praised the government support schemes.

"Once again the UK labour market surprised to the upside with unemployment rising modestly to 5%.

"The furlough scheme has been the central tenet of the government's economic response to COVID-19 and has worked well. Not only has it prevented an overly deep recession, it sets the UK up for a strong recovery if economic restrictions can be sustainably lifted in the spring."

The UK's rapid vaccination drive has been a rare pandemic success. By January 17, the UK had given at least the first jab to more than 3.9 million people.

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The Bank of England cut its forecast for UK economic growth in 2021 on Thursday, saying new coronavirus curbs put in place in January would cause a contraction in the first three months of the year.

Yet the UK's central bank said the speedy rollout of coronavirus vaccines would help the economy "recover rapidly" in the second half of the year. The BoE predicted the economy will regain its pre-COVID size by the first quarter of 2022.

The Bank left interest rates at their record-low level of 0.1%, and held its bond-buying package steady at £895 billion ($1.22 trillion).

It also gave an update on its review of negative interest rates, saying it would start preparing so that it could implement them if needed.

However, the BoE stressed that this "should not be interpreted as a signal that the setting of a negative bank rate is imminent, or indeed in prospect at any time."

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It said it had found that Britain's banks would need at least six months to be ready for such a policy. Yet the BoE's forecast said the UK economy should be growing rapidly by then.

The pound rallied sharply after the announcement as investors reacted to the suggestion that negative rates are not a prospect any time soon. Sterling was last up 0.28% to $1.368.

In its latest quarterly report into the health of the UK economy, the BoE predicted gross domestic product would now grow 5% in 2021 compared to its November estimate of 7.25% growth.

The report said the restrictions put in place in January meant "GDP is expected to fall by around 4% in 2021 Q1."

Yet it said the economy is then "projected to recover rapidly towards pre-COVID levels over 2021", as the UK's vaccine programme causes "an easing of COVID-related restrictions and people's health concerns."

It said that inflation is expected to "rise quite sharply towards the 2% target in the spring" - from the current level of 0.6% - thanks to certain consumption-tax cuts coming to an end and rising energy prices.

The Bank now expects inflation to be around 2% in 2022 and 2023, while the economy is now expected to grow 7.25% in 2022, compared to the November prediction of 6.25%.

More than 100,000 people have now died from coronavirus in the UK, giving the country one of the worst death rates in the world.

Its economy has been hit particularly badly. The International Monetary Fund last month said the UK had suffered the deepest contraction out of the G7 group of rich countries in 2020, at 10%.

However, the UK has been one of the fastest at distributing coronavirus vaccines. More than 10 million people have already received their first jab.

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Global shares and futures traded near record highs on Tuesday ahead of the outcome of the Federal Reserve's upcoming policy meeting the next day.

S&P 500 futures were last up 0.12% at 4:30 AM E.T., while Nasdaq futures were up 0.14% and Dow Jones futures rose by 0.05%, suggesting a modestly higher start to trading later on. The S&P and Nasdaq both closed at all-time highs on Monday. 

The Fed's statement after its meeting will provide an indication of the central bank's thinking on the outlook for inflation and a possible shift in its asset purchase plan. 

"Their core message that inflation is close to peaking and will soon start dropping back as reopening "frictions" ease is likely to be repeated – we still have doubts on this. We are likely to see a modest upward revision to their inflation forecasts to reflect the recent run of upside surprises," ING economists said. 

Inflation concerns eased as commodity futures, which have been at the heart of the rise in prices in the last 12 months, continued to ease on Tuesday in Europe. Lumber fell below $1,000 for the first time since March on Monday and was down almost 6% on Tuesday at $996.20 per thousand board feet. US copper futures were last down 3.85% to $4.35 a pound on Tuesday, while nickel - a key ingredient in the production of steel - fell by 3.19% to $17,877.50 a ton. 

The easing inflation pressures were also reflected in 10-year US Treasury yields, which were last at 1.484% on Tuesday, down 1.4 basis points. 

Oil however continued its rally and was set for a fourth daily rise, after closing at a two-year high on Monday, which boosted European energy stocks. Brent crude futures were last at $73.05 per barrel, up 0.26% while WTI futures rose by 0.25% to $71.06 a barrel.

European equities extended gains on Tuesday after the German DAX and the Euro Stoxx 50 closed at record highs on Monday. The DAX was last up 0.66%, while the Euro Stoxx 50 was up 0.51%. London's FTSE 100 rose by 0.33% after data showed UK unemployment rate fell to an eight-month low in April. An extension of the UK's COVID-19 restrictions however likely dampened some of the upward momentum. 

"While the outlook for unemployment appears more positive as we head into the summer months, that doesn't mean it can't go higher. A lot of jobs that were around over a year ago, may still not come back, and now that next week's June reopening date has slipped, we could see more businesses could fall by the wayside." Michael Hewson, chief market analyst at CMC Markets, said. 

The pound initially rose after the data against both the dollar, but was last down 0.21% at $1.4084. 

Asian markets were mixed on Tuesday, as the Japanese Nikkei 225 closed 0.96% higher but Hong Kong's Hang Seng index fell by 0.71% and China's Shanghai Composite lost 0.92%.

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The Bank of England said on Thursday that it now expects UK inflation to surge above 3% as the economy reopens from lockdown. But it nonetheless maintained its bond-buying target at $1.25 trillion, saying sharp price rises should be temporary.

Departing chief economist Andy Haldane was the only one of nine monetary policy committee (MPC) members to vote against the plans. Raising concerns that strong inflation may stick around, he voted to cut the bond-buying package by 50 billion pounds ($70 billion).

The Bank also decided to keep its main interest rate at the record-low level of 0.1%, in a unanimous vote, on top of the 8-1 decision to keep the bond-buying package steady at 895 billion pounds ($1.25 trillion).

The pound fell after the announcement, and was around 0.44% lower against the dollar at $1.389.

UK inflation jumped 2.1% in May year-on-year, the biggest rise since July 2019 and above the Bank of England 2% target. It was a bigger rise than the central bank had expected.

The Bank said on Thursday that it now expects inflation to jump above 3% for a temporary period, "owing primarily to developments in energy and other commodity prices." In May, it had only expected inflation to rise temporarily above 2%.

Yet the Bank's MPC said it expects inflation to fall back again as commodities price rises fade. However, it said there are "risks around this central path, and it is possible that near-term upward pressure on prices could prove somewhat larger than expected."

Central banks in advanced economies are dealing with the strongest inflation in years, as growth rebounds sharply after the COVID-19 slump. Too much inflation is seen as disruptive for economies, and major central banks try to keep it at around 2%.

In the US – where year-on-year inflation hit 5% in May– the Federal Reserve has signaled a slight shift in its expectations for monetary policy. Officials now predict the central bank will raise rates in 2023, according to "dot plot" estimates released last week.

But Paul Dales, chief UK economist at consultancy Capital Economics, said: "Other than the [Bank of England's] MPC noting the growing upside risks to inflation at today's policy meeting, there were no real signs that it is thinking about tightening policy sooner, à la the Fed.

"We think policy will be tightened much later than the mid-2022 date the markets have assumed."

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