U.K. rekindles the 'Special Relationship'
|British Prime Minister Theresa May echoed President Trumps “America First” rallying cry yesterday by announcing that post-Brexit the Government would “put U.K. interests and U.K. values first”.
In itself that is a worthwhile and exceedingly sensible sentiment but any hint at protectionism spooks markets and is something to be revisited once the reality of Brexit is complete.
President Trump signed the Executive Order to build a wall between the United States and Mexico. This will become a concrete (excuse the pun) symbol of his presidency I am sure graffiti artists are already gearing themselves up (buy spray paint futures!)
The dollar index fell to its lowest level since early December. The president's divisive plans to reshape U.S. immigration and national security policy rattled some investors, partly because the U.S. needs foreign capital to finance its large current account deficit.
Hopes for a rapid trade deal for the U.K. with the U.S. buoyed the pound and with the Prime Minister being the first foreign leader to visit President Trump later this week, thoughts have turned nostalgically to the special relationship between Ronald Reagan and Margaret Thatcher.
The difference this time is that it will be built not on mutual admiration but mutual need. Trump needs (although he won’t admit it) validation of his Presidency outside the U.S. and May needs a quick win on trade to corroborate the whole Global Britain scenario.
The Euro has taken a backseat since the start of the year acting in a reactionary manner to what has been happening with the dollar and pound. Traders have been looking at technical levels with the 1.0780 area proving a tough nut to crack.
Politically, that could all be about to change with elections in The Netherlands, France and Germany.
In France, a scandal is brewing over the wife of Conservative front Francois Fillon and her role in his legislative team. It is rumoured that she had, apparently, a ficticious position simply drawing a salary to supplemt the family income. This is not unheard of in political circles in France.
Marine Le Pen the far right National Front leader is sure to pick on this as further evidence of corruption which she promises to eradicate along with immigration and the Euro!
Today we have preliminary Q4 GDP data from the U.K. with a reading of 0.5% growth expected following from 0.6% last time. The U.K. economy is holding up well despite the Brexit headwinds but the true test is still to come as inflation rises and consumer confidence ebbs away.
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