GBP: Brexit plans unravelling
The week started with Cabinet resignations and is ending with a government that could soon be hamstrung by rebels within its own party. Following the publication of the latest whitepaper on the future relationship between the UK and European Union, Brexiteer elements within the government have made it very clear that they will join with Labour and other opposition MPs and vote down the government’s trade bill this coming Monday. For all the progress that the Chequers agreement and this whitepaper were said to offer, Brexit has regressed in the past few weeks.
Having read all 104 pages of the government’s whitepaper, I can’t see a way that these plans will be accepted anywhere; not in Westminster nor in Brussels. In an attempt to appease both tribes the government has managed to find a true middle ground that nobody likes.
Sterling moved a little higher in the minutes following the publication of the government’s Brexit whitepaper which struck me as odd. It could possibly be on the pure schadenfreude that if Jacob Rees-Mogg is livid then it’s probably a relatively more sensible proposal.
May’s stance has not been helped by President Trump’s interview with The Sun newspaper in which he said that Theresa May’s plans for a soft Brexit would likely end hopes of a trade deal with the US. Stating that Boris Johnson would be a ‘great leader’ is just another highlight.
Despite all that strong data last week, the politics of the past week have dragged the pound back into the mire and it is the biggest faller overnight.
Bank of England Deputy Governor John Cunliffe speaks at 12.30 in the only piece of non-political UK news before the weekend.
USD: Carrying on
In an interview, Fed Chairman Powell laid the foundations for further gains for the US dollar. He told Bloomberg that he sleeps “pretty well on the economy right now”, noting that it’s in a “good place” with unemployment at its lowest level in years and inflation close to the central bank’s 2% target.
Caveats to this optimism of course came from the knowledge that trade disputes could end up being a negative for the economy if they result in a protracted period of widespread higher tariffs.
US consumer confidence numbers this afternoon should be enough to keep the USD on the front foot into the weekend.
CNH: Beat the tariffs
China reported a trade surplus of CNY261.9bn in June overnight with the overall surplus with the US rising to $28.97bn in June. That is the highest since records began in 1999 with exports climbed to $42.6bn, also a record. Chinese exporters, and their US customers are stuffing things onto ships and planes in a bid to get ahead of the tariff plans of the Trump administration.