No deal for Britain better than bad deal for Britain = no surrender
Theresa May delivered a rousing speech yesterday as she confirmed that the UK will be exiting the single market and the customs union. Firing a warning a shot to EU negotiators, she proclaimed, “no deal is better than a bad deal”.
The city approved of the plans for a transitional deal, with no Brexit cliff-edge for businesses, and the freest possible trade with European counterparts. The Brexit deal will be ratified by Parliament once ready.
The Pound jumped up by 2.15% against the Dollar and 1.8% against the Euro. The practicalities of the UK’s Brexit stance will be tested in time and traders are holding off from major decisions until they have more detail from Downing St.
The climb in GBPUSD seen yesterday after Theresa May’s speech was the largest one day increase since 2008 – a rise in the Pound of 3%. However, it wasn’t entirely due to the UK PM – the Wall Street Journal printed Donald Trump’s comments that the Dollar was too strong, with Chinese currency manipulation to blame. A senior economic advisor to the President-Elect stated that the strong Dollar could cause problems for the US and global economy. The comments, so close to the inauguration, suggest that Trump may seek to weaken the US Dollar when he takes office. Consequently investors sold the Dollar.
San Francisco Federal Reserve (Fed) president John Williams called for gradual US interest rate hikes over the next few years to keep the economy from overheating. With the unemployment rate at 4.7% the economy has reached full employment, Williams said. He added that inflation is on track to reach the Fed’s 2% goal over the next couple of years.
The ZEW surveys were the only European data of note yesterday. The German ZEW survey showed that economic sentiment continued to improve in January but fell short of expectations. For the Eurozone as a whole, sentiment also improved, with the survey reaching 23.2, above previous 18.1, but below the 24.2 expected.
Data to watch: 7am German Consumer Price Index, Harmonised CPI. 9.30am UK Unemployment Rate, Claimant Count, Average Earnings with & without bonus. 10am Euro Consumer Price Index. 1.30pm US Consumer Price Index, CPI Excl Food & Energy. Industrial Production, Capacity Utilization, NAHB Housing Market Index. 7pm US Fed’s Beige Book. 8pm US Yellen speech.