Sterling Expectations fall on Rates and Brexit

Outlook for pound worsening

Despite continuing to trade in narrow ranges in a market that is still in “holiday mode”, the outlook for both the pound and the wider U.K. economy is deteriorating. With the lack of a clear plan for Brexit and “bits and pieces” of discussion papers being released without any clear strategy, concerns are growing about the capability of the Government to negotiate an orderly departure from the EU.

Business investment is slowing at an alarming rate as companies place any plans for expansion on hold until the picture becomes clearer in whatever way that materializes. The U.K. economy already the weakest in G10 is in danger of falling behind as the rest of the global economy finally emerges from the last vestiges of the global financial crisis.

The pound has now fallen through major support against the single currency at 0.9150 and could see further falls as market activity returns to normal.

House prices which are a mainstay of consumer confidence fell by 0.9% month on month in August although year on year growth was at 3.1%. If house prices start to fall as the Autumn approaches and the gap between wages and prices widens, the economy could easily fall back towards recession.

Considering your next transfer? Log in to compare live quotes today.

Davis Ignoring EU conditions for post-Brexit agreement

Back in March when the two major Brexit protagonists met for the first time, it was made very clear that the EU were not prepared to discuss how the relationship would work once the divorce was complete until there was progress on three basic issues.

The U.K. has staunchly refused to budge on the issue of the rights of EU citizens remaining in the U.K. following Brexit. It has made (in the shape of Boris Johnson’s “go whistle comments and Eur 40 bio. plan) derisory financial offers and plans to make no change to the land border between the U.K. and Ireland, a decision that is totally opposite to what the EU will deem necessary.

The EU is clearly dissatisfied with the progress that is being made since its chief negotiator, Michel Barnier has now said that the talks on trade and customs won’t start in October as there hasn’t been sufficient progress on the three demands.

The EU and U.K. are handling Brexit in a totally separate way. The EU, driven of course as it is by hordes of bureaucrats, appears methodical in its methods, having a clear agenda and timetable. The U.K., as characterizes this Government is haphazard and lacking in both vision and purpose.

Jackson Hole Symposium Starts with Draghi Speech

The Jackson Hole Symposium at which Central Bankers compare notes starts today. The first major speech will be by Mario Draghi, the President of the ECB. He is unlikely to provide any new guidance, despite the market awaiting a timeline for the withdrawal of “extraordinary measures. He will most probably reiterate his caution over an over-zealous approach to a tightening of monetary policy despite pressure being exerted by Germany for rates to return to normal.

The Eurozone which was beset by debt problems and a banking crisis caused by the financial crash is emerging stronger and is now rightly considered as a major part of global trade to match China and the U.S.

Sr. Draghi is at the forefront of global financial regulation working closely with BoE Governor Mark Carney in Carney’s role as Chairman of the G20’s Stability Board a position in which he was preceded by Draghi.

Both Carney and Draghi will stand down from the Central Bank roles in the next two years and both will be hard to follow.