PM May Confronts Brexit

John M. Bland, MBA

While the U.K. Brexit vote seemingly was settled back in June, there remains a lot of interest in the topic because we all knew the "devil was going to be in the details". New U.K. PM May was quietly against Brexit before the referendum, but has been forced to embrace if due to political realities. The issue now is how she will navigate the U.K. exit from the EU with her party each day taking a harder stance on exit and therefore keeping her feet to the fire. The chatter has been that May would have preferred to pursue a "soft" Brexit, but that is not politically feasible. A "soft" Brexit means that the U.K. might continue to contribute funds towards the EU budget and in return would enjoy a special trade relationship with Europe. Immigration and borders would still have to be discussed. A "hard" Brexit is a clean break with the EU.

There are forces within the EU that are demanding a "hard" Brexit and about two-thirds of her party has flipped into favor of a "hard" Brexit as well. Paris and Frankfurt now see a chance to benefit from a clean U.K. departure by making inroads on London as a global financial center, by moving big financials into the EU. However, most financial houses are leery of operating under the thumb of Brussels. Increasingly PM May has less and less wiggle room. One possible fly in the ointment is how the British High Court would rule on who has the power to make the final decision on Brexit. Is it the government or must it be approved by Commons and/or the House of Lords. A final decision is expected by some time early in December. Stay tuned!

Current Market Conditions

The USD has taken on a bid tone over the past week after Chair Yellen's comments a week ago that the Central Bank will be running an aggressive policy to force growth and will overlook any overshoot in inflation until a stronger economic advance takes hold. Chair Yellen's approach looks to be remarkably similar to Bank of England's Carney policy. Its pretty clear the two must be comparing notes on policy. U.S. Bond yields remain depressed following mixed September CPI data and the recent Fed comments.


24-Oct Mon

All Day flash Mfg PMIs

25-Oct Tue

08:00 DE- IFO

14:00 US- CB Consumer Confidence

26-Oct Wed

All Day flash SVC PMI

00:30 AU- CPI

14:00 US- New Homes Sales

14:00 US- Pending Homes Sales

14:30 US- EIA Crude

27-Oct Thu

08:30 GB- GDP

12:30 US- Weekly Jobs

12:30 US- Durable Goods

23:30 JP- CPI

28-Oct Fri

12:30 US- GDP

14:00 US- University of Michigan

30-Oct Sun

00:00 RZ/GB Clocks turn back one hour

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John M. Bland


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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