Grim determination to pervade negotiations
This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning. -Winston Churchill
And so, begins the process.
It will end with the U.K. either standing proudly independent, welcoming trade with the wider world, or cowering in a dark corner with an economy suffering stagnation, a currency no one wants and a debt mountain that will leave our children’s children as global paupers.
Oh Maggie, where are you when your country needs you?
There has been a great deal made about the fate of the U.K. following Brexit, but it does need to be said that the fate of the EU is almost as precarious. As a French think tank reported the other day, this is a crisis for the EU as well.
Even though the U.K. was only ever a little more than tolerated by its neighbours, the fact remains that it was a full participant not only in the financing of the bloc, but also in the fabric of its structure.
As has been said before, the negotiation is crucial for both sides. Donald Tusk will need to be pragmatic in his approach. David Davies, the U.K. Brexit Minister, has had plenty of time to forge his position. The opening exchanges will be the most interesting as the non-negotiables are agreed. After a while it will revert to more “technical” issues and we will all let out a collective yawn, only to be awoken by some left field black swan event.
Trump suffers crisis of confidence but dollar weakness overdone
There was never any question that the market would “have its say” on the inability of Donald Trump (and Paul Ryan) to even get their healthcare reform bill off the starting blocks.
However, in the grand scheme of things there is no possibility that the economic stimulus won’t be passed. Traders' knee jerk reactions are more a commentary on the event of the day, but the bigger picture always prevails.
The dollar has fallen through key levels against the euro and sterling but this does not herald a major change in direction or sentiment. This is the distinction between profit taking and a change of opinion. What it does mean, however, is that the honeymoon is over. It serves as a warning that actions and results are now needed with less rhetoric.
A more sobering commentary than one day’s froth is a look at the daily chart of USD/JPY. Over the past fourteen days, the dollar has had just two “up” days. This shows how risk appetite has been waning but this is now a little overdone and the dollar has opened higher in Asia this morning.
In a similar manner to last month, we must wait almost a week into April before the U.S. employment report is released. A +200k figure is the early prediction for the headline but it is wage growth that will be the focus of economist’s attention. This is the one statistic that has been holding back the FOMC from a more aggressive strategy.
Although one month’s data will not have a lasting effect, a beginning of a trend towards higher wages growth will ask the question whether a three-hike strategy for 2017 is sufficient?
Today, the market is in the eye of the storm. No more is expected before the letter is delivered tomorrow. Given the fractured state of leadership and governance that characterizes the EU, there will likely be a whole range of comments and views from Schaeuble to Wilders and Le Pen to Sturgeon as battle lines are drawn.
Let the games begin!