U.K. Growth Forecast Cut

IMF predicts 3.5% global growth this year

The International Monetary Fund yesterday issued its quarterly report on the global economy in which it produces the results of its research into global growth expectations.

Global growth is expected to remain unchanged at 3.5% in 2017 and 3.6% in 2018.

It cut its expectation for growth in the U.K. to 1.7% in 2017. Their prediction of 1.5% growth in 2018 was unchanged. The global lender also cut its forecast for the United States to 2.1% from 2.3%. Next year is likely to see a larger variance with expectation falling to 2.1% from 2.5% previously.

Both countries underperformed in the first quarter of the year which, in the case of the U.S., was a veiled comment on the Fed’s interest rate hikes.

Brexit continues to weigh on U.K. growth expectations and political concerns have been added since the inconclusive June election.

The pound, ironically, climbed away from it recent lows but this was technical following the initial rejection of the 0.9000 level against the Euro. It corrected to 0.8920 before further buying of the common currency drove it back to 0.8945.

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U.K. Ministers soften hard Brexit stance

Dr. Liam Fox, the U.K. minister charged with responsibility for initiating trade deals post-Brexit has been quoted recently as saying that the U.K. wouldn’t suffer unduly from failure to agree access to the single market. He has based his assumption on a view that the EU would suffer almost as badly from the lack of a trade deal as the U.K. would.

Yesterday he seemed to soften his stance somewhat agreeing that a transition period would smooth the U.K.’s departure. This had previously been considered as simply putting off the inevitable as at some point the break would have to happen.

Dr. Fox’s view was backed up by Business Minister, Greg Clark, who agreed that such a period could lead to a “softer” exit. Fox, who is in the U.S preparing the ground for a U.K./U.S. post-Brexit trade agreement, went on to say that it was “optimistic” to expect a free trade deal with the EU to be concluded by 29th March 2019, the date on which the U.K. officially departs.

Against the dollar the pound is also recovering from its recent weakness. It now appears to be supported above 1.3000, last trading at 1.3037.

Polish President defuses EU row, for now

A decision taken by their Prime Minister which had set Poland on a collision course with the EU was diffused a little yesterday as the President vowed to veto legislation which gave the Government greater power over the courts.

Brussels had maintained that such legislation would be contrary to EU law where the divide between Government and the judiciary is a basic requirement. The row is likely to escalate as the Hungarian Prime Minister backed Poland over what he called the “EU inquisition”.

It is immaterial that the legislation is unpopular and likely to be vetoed, there is a growing feeling throughout the eastern states that the EU is exerting too much control over their domestic affairs and this is leading to a rising nationalist feeling which had seemingly gone away following elections in France and The Netherlands.

There has been no reaction from the currency which is still very strongly supported having corrected to 1.1625 against the dollar yesterday. A rise towards the August 2015 high of 1.1715 is now likely given the contrasting outlooks for the EU and U.S. economies.