May Fails to Clarify Brexit terms

Brexit Negotiations barely advanced by May’s Proposals

There is a sense of anti-climax as traders dissect Theresa May’s speech in Florence on Friday only to discover that her concentration on the relationship following 31st March 2019 has disappointed the EU who still require firm proposals for the “three demands”

The negotiations have descended even further into the semantics of what constitutes a proposal. David Davis the U.K. Brexit Minister, at yesterday’s renewal of direct negotiations, was quoted as saying that Mrs May’s speech demonstrated the British willingness to get the talks moving while Michel Barnier called for clarity and a “drilling down” to find firm proposal as to the settlement of the treatment of EU citizens remaining after Brexit and the exact total contribution the U.K. is offering to the EU budget post-Brexit. Firm proposals over the border between the Republic of Ireland and Northern Ireland are also required but that issue is secondary to the other two.

The opposition Labour Party have started their annual conference and their Leader Jeremy Corbyn has managed to stave off a rebellion over Brexit policy by avoiding a vote on a remain agenda becoming official policy.

The pound drifted lower as traders have become bored and disillusioned with the process which seems to be heading nowhere fast reaching 1.3431 0.8840 before recovering a little.

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German Election fulfils expectations

The result of the German was entirely as expected with the highlights being Angela Merkel’s CDU/CSU alliance winning the highest number of seats and the AfD managing to assure representation in the Reichstag. As is often the case, the devil was in the detail. Merkel’s Party had its worst performance in close to seventy-five years and support for the other member of the “Grand Coalition” the SPD collapsing. The SPD have decided to leave Government and form the main opposition Party.

In a mirror of events following the Brexit referendum the Co-leader of the AfD Frauke Petry quit the Party and will sit as an independent. Divisions over policy had come to light following what was labelled as a stunning performance even though opinion polls had predicted AfD winning between 12% and 15% of the vote.

Mario Draghi the ECB President has been clear in his concern over acting precipitously as the recovery of the Eurozone continues and an event such as this confirms his concerns were merited.

It seems the so-called Jamaica coalition will now happen as the Greens and pro-business FDP are invited to joining forces with the CDU/CSU.

The Euro has so far fallen a little in the wake of the election and it will only react badly if Merkel appears unable to form a coalition. It reached 1.1831 with little change overnight.

Trump cannot leave well alone

It is hard to imagine several of President Trump’s predecessors becoming embroiled in a war of words with a leader like Kim Jong-un. It seems that Kim is well versed in the art of saying just enough to get under Trump’s skin but falling short of any action that would upset his only ally, China.

Xi Jinping, the Chinese leader could very easily be orchestrating the whole thing as it benefits his country to keep the U.S in such a state of flux militarily adding to the political mess and lack of economic stimulus Trump has engineered at home.

There is seemingly no end to this situation as Kim will be allowed by China and almost encouraged by Russia to advance his nuclear ambitions but no-one knows where they will draw the line.

The financial markets are growing a little tired of the current drivers; composing of monetary policy, Brexit and the Korean Peninsula. They each have a common element; a singular lack of action, characterized by posturing. Whether that is Mark Carney and Janet Yellen promising but then not really promising rate hikes, Brexit and its well-documented lack of progress or the seemingly endless mind games being played by Kim which gets to Trump every time.

The fourth quarter is almost upon us and more of the same is to be expected as traders start to wind down their activity protecting what they have.