UK: Hard Brexit fears returns with May’s key speech on Brexit in focus today – Danske Bank

Sandeep Kanihama FXStreet Contributor

According to the Senior Analyst, Mikael Olai Milhøj at Danske Bank, Brexit has moved back into the spotlight after a recent TV interview with PM Theresa May where she repeated that control over immigration and national sovereignty are higher on the government’s priority list than access to the EU single market.

Key Quotes

“Over the weekend and ahead of PM Theresa May’s important Brexit speech today, Brexit headlines have dominated the UK media. According to a story in The Times, Theresa May should be prepared to leave both the EU single market and the custom union in order to regain control over immigration. The Britons seem to support this stance, as 46% agree that greater control over immigration is more important than access to the single market (39% against), see Reuters. In general, PM Theresa May and the Conservative Party still enjoy huge support in opinion polls.”

“In a comment in the Sunday Times, Brexit Secretary David Davis has not rejected a transitional deal between the UK and EU to make the process as smooth as possible. To some extent this is also the spirit of the so-called ‘Great Repeal Act’, where existing EU laws will be transposed in UK domestic laws on exit date.”

“As expected, the UK has begun to use taxation and regulation as negotiation weapons. Chancellor Hammond has hinted that UK could become a corporate tax haven with looser regulations if the EU tries to punish the UK. The Dutch Prime Minister Lodewijk Asscher has said he will block any EU-UK deal unless it includes a deal on taxations.”

“In an interview in The Times conducted by Michael Gove (one of the leading Conservative Brexiters), President-elect Donald Trump said he wants a trade agreement between the US and the UK secured ‘very quickly’. Trump also said that ‘Brexit is going to end up being a great thing’.”

“The EU Commission’s chief Brexit negotiator, Michel Barnier, tweeted Saturday that the ‘EU would need special vigilance on financial stability risk’, as he recognises the importance of the City of London to EU businesses. He noted, however, that the City should not expect a special deal.”

“We are currently reviewing our GBP forecast but we see potential for further GBP weakness in the coming months as the triggering of Article 50 moves closer. As such, EUR/GBP once again touching 0.90 should not be ruled out.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

GBP/USD strengthens to near 1.3400 as UK political risk fades

The GBP/USD pair gathers strength near 1.3395 during the Asian trading hours on Thursday, bolstered by fading domestic political uncertainty. However, hawkish minutes from the Federal Reserve and renewed tensions between the US and Iran might support the US Dollar and cap the upside for the major pair.

EUR/USD sticks to positive bias above 1.1400; Mideast tensions cap gains

The EUR/USD pair attracts some buyers for the second straight day, though it lacks follow-through and remains confined within the previous day's range during the Asian session on Thursday. Spot prices currently trade around the 1.1420 area, up less than 0.10% for the day, and remain at the mercy of the US Dollar price dynamics.

Gold sees more pain as Iran tensions revive inflation fears

Gold price reflects signs of softness on Thursday, trading 0.5% lower at around $4,056 during the Asian trading session. The precious metal is under pressure as Middle East hostilities have revived fears of high global inflation, a scenario that discourages major central banks from easing monetary conditions. This framework bodes well for interest-bearing assets, but diminishes the appeal of non-yielding assets, such as Gold.

Ripple and Stellar extend downside as weakening technicals

Ripple and Stellar extend losses on Thursday, correcting over 6% and 10%, respectively, so far this week. XRP falls below $1.090, while XLM posts a fifth consecutive day of correction and closes below key support levels.

2.50%: Why the Kiwi's first hike in three years is a wager on a number nobody can see

The Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) by 25 basis points to 2.50% at 02:00 GMT on Wednesday, its first hike in three years and the moment the bank that cut deeper than any G10 peer last cycle turned to face the other way.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.