Ransquawk

May’s Parliament speech sheds little light

As one gets older, a natural scepticism takes over and Politicians become more figures to be questioned rather than believed and their motives, beyond remaining in power, are cloaked in doubt.

The British Governments abysmal performance in negotiating the UK’s departure from the EU is such an event. Theresa May, the Prime Minister has been handed a task that she never expected and is probably the most difficult possibly impossible task since the Falklands War.

Having said that it is perfectly acceptable for the country to expect its Government to make a considered yet imaginative fist of what is a “radical blank canvas” where nothing is outside the realms of consideration if at the end of it all he UK is outside the confines of Brussels influence.

The weak and “wishy-washy” set of five “tests” that the UK will apply to the final deal are all well and good, but the substance is now necessary, and time is running out. The entire population knows that Ireland will never be abandoned to be in a nether-world with one foot in the customs union and one in the UK, so why not just say it rather than “protecting the integrity of the Union of British nations”

Italy; Radical but realistic

Basking in the glow of a right-wing victory in the Italian election the two parties who garnered most votes in the Italian election; La Liga and Five Star each injected a sense of realism into proceedings not acting precipitously in discussing Rome’s relationship with Brussels.

Italy may have shifted to the right but not by any seismic measure and as such Italy will remain in both the EU and euro although demands will be made of Brussels for reform.

That reform is going to come around the subject of immigration. The volume of refugees crossing the Mediterranean will start to grow again as spring turns to summer and Italy will demand a fairer more equitable solution. The Italian President will decide in the coming weeks over which of the two parties is most able to provide the country with a stable and lasting Government. Given the propensity for radical proposals within Italian politics there will be doubt that an agreement can be reached.

Germany has a far more structured and “unexciting” political make-up yet is has taken six months for a Grand Coalition to be agreed there but yesterday’s announcement allows Angela Merkel to continue as Chancellor.

Trump’s trade bluster to be replaced by economic considerations

It seems it was all just typical Trump Bombast and a trade war is a long way from starting. The President is trying to get Canada and Mexico back to the negotiating table to discuss the North American Free Trade Agreement (NAFTA) which was agreed by his predecessor. The threat of tariffs on aluminium and steel should be sufficient to get talks started and America’s major global trading partners can relax again.

The economy will take centre stage again this week following Jay Powell’s debut testimonies in which he fanned the flames of interest rate hikes but retained sufficient wiggle -room should inflation fail to behave as expected.

This week’s employment report will go some way to confirming Powell’s sentiments as the wage data from the previous report was the catalyst for a period of uncertainty and volatility.

Expectation for a similar result in February is growing with a headline of 250K+ and wage growth above 3%. Such a result would see the dollar index testing resistance close to 92.50.

Bank of England Chief Economist Andy Haldane will speak later, and any mention of interest rates or inflation will be a driver for Sterling on what should otherwise be a rangebound day.

 

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