May to hail breakthrough

It was a long time coming and very much at the eleventh hour, but the U.K. and EU finally managed to make sufficient progress for talks to move on to stage two of the Brexit process.

However, one man’s negotiation is another man’s capitulation and what was agreed seems to have been nothing more than an acceptance that a larger than originally offered financial settlement was needed, that the Irish border would continue to favour Dublin and the European Court of Human rights would still oversee the EU citizens who choose to remain in the U.K. following Brexit.

The agreement is neither momentous or hard fought. It could have been reached long before the deadline had the U.K. negotiating team not prevaricated quite so much and realized that there would be little or no concession from Brussels. Clearly the political ramifications of simply acquiescing to the demands of Brussels would have been severe, but the negotiations could/would have moved on more quickly.

Traders “voted with their feet” on the agreement pushing Sterling lower against the common currency although this week’s data releases and MPC meeting could see it fall further.  Inflation is likely to be unchanged at 3% and the gap between incomes and prices will also remain the same.

NFP Confirms hike. Just!

The likelihood of a rate hike, following this week’s FOMC meeting in the U.S, remains just about on track following Friday’s employment report. The headline number exceeded traders’ expectations although the October figure was revised lower. 228k new job were created but the earnings data disappointed. The rate of increase in hourly earnings fell from 0.3% in October to 0.2% in November.

The dollar index hardly reacted to the data with a hike already priced in. The risk is clearly to the downside should there be no hike this week. The primary driver of the dollar is interest rate policy and it is receiving support from the Eurozone where rates are unlikely to be raised in the next year or so and the U.K. where the ill-advised hike last month is unlikely to be repeated any time soon.

By the end of the week, traders will be closing their books for the year as those who have been profitable hold onto what they have and those who have had a disappointing year realize it is better to start again in January. Next year will be characterized by a change at the top in the Fed with Jerome Powell bringing a more pragmatic approach to the Fed Chair.

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Bitcoin moves a step closer to the mainstream

Like Hoover or Kleenex, Bitcoin is becoming both a “brand” and the generic term for all cryptocurrencies. While many see the incredible rise in the price of bitcoin as a bubble its move towards general acceptance has meant that more and more people are “getting involved” although the complicated way wallets are created and used together with the relatively slow and expensive movement of coins between wallets means that speculation rather than usage will continue to be the main driver.

The start of Bitcoin trading on CBOE at 11.00 GMT last night was another major step forward. With the price rallying close to it’s all time high the fears of those who felt the bubble would burst have, so far, been unfounded.

It is impossible to produce analysis for the cryptocurrency market in general or Bitcoin without betraying a personal bias. It is a “marmite” phenomenon.  In informal British usage, marmite is being used to fill a gap in the lexicon for describing something that people either love or hate. There is no middle ground, no meaningful technical analysis and no basis on which to build a believable case either way for where it will be in a month, let alone a year.

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