According to analysts at Rabobank, Rudd’s resignation comes just ahead of the next round of Brexit talks and on Wednesday EU and UK negotiators will meet in Brussels with the aim of advancing trade talks.
Key Quotes
“The June EU summit has emerged as a key interim target for these talks with both sides aiming to have the bones of a trade deal on the table by October. This would allow time for the deal to be ratified by all EU national parliaments. Although Brexit talks overcame hurdles in December and March with the agreements on the legacy issues and the transition period, the time left to hammer out an agreement on trade is very short. On Friday the UK and the EU agreed to form a working group to be chaired by ECB President and BoE Governor Carney which will focus on the need to minimise risks to the financial markets should Brexit talks break down.”
“Plenty of headlines regarding trade can be expected in the coming days. A delegation of US officials which will include Treasury Secretary Mnuchin and Trump’s top trade advisors Kudlow, Lighthizer and Navarro is due in China this week for trade negotiations. Despite the risk of a fully-fledged trade war between the world’s two largest economies, the market consensus appears to be hopeful of a compromise. Fears regarding the impact of a 25% tit for tat levy by China on soybeans have spread unease amongst US farmers which could tone down Trump’s stance.”
“Not all the news regarding trade is likely to be coming from China this week. Temporary exemptions granted by the US to selected allies on 25% tariffs on steel and 10% on aluminium are due to expire this week. Mexico, Canada, Argentina, Brazil and the EU are under pressure to negotiate alternative arrangements.”
“Although the week ahead will be subdued by May Day market closures tomorrow, there is plenty of key data scheduled. Friday brings the next round of US labour data. The focus is likely to be on the April earnings data which is expected to hold at 2.7% y/y. Ahead of this, today will bring another crucial measure of US inflation in the form of the March PCE deflator. The core number is expected to show an uptick to 1.9% y/y. ISM, factory order and durable goods are among the other US releases scheduled for this week. Eurozone CPI inflation and Q1 GDP and UK April PMIs are also due in the coming days.”
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