Brexit deal unpopular with all but EU
27 November, 2018
GBP-EUR gained somewhat yesterday morning, showing an upturn of around quarter of a cent. There were a number of speeches by ECB members (including Mario Draghi) throughout the day and some below par IFO data from Germany in the morning. The main topic of discussion from the ECB chief, surpirsingly was something ther than the Brexit; the formation of one central spending pot to automatically deploy if and when an EU country falls into economic crisis. He cited the USA as an example, where the Federal government spending remains uninterrupted if trouble hits an individual state. Currently, eurozone countries that fall into recession can’t cut central bank interest rates or let their currencies devalue…as they don’t have their own currency to do so. Something Draghi wants to change but has had some resistance from certain states including Germany.
It is well known that the Brexit deal, garnered by the PM is unpopular. Now however, Donald Trump has also entered into the very one-sided debate. The President claims that the deal is great for the EU but may not allow the UK to trade with the US. No. 10 of course debuffed these claims and stated it “is very clear that the UK will be able to sign trade deals with countries around the world”. There is a chance there will be a TV debate between May and Corbyn, according to a BBC website page (https://www.bbc.co.uk/news/uk-politics-46352463). This event could happen on 9th December shortly before parliament votes on the PM’s Brexit deal. As it stands she will have to gain an awful lot of support in a matter of two weeks, with any number of outcomes, should the deal be rejected and the likelihood of sterling weakness a shoe-in.
A very quiet day on the eco-stat front today with only a speech from EU’s Mersch of any note, although tomorrow sees UK bank stress test results and financial report. With little to support the pound in these turbulant times it is worth staying in touch with your CI account manager for any updates and movements in the rates.