Further Brexit trade comments weighs on the pound despite UK inflation figures and employment data painting a good picture of the UK economy.
UK Inflation rose to a six-month high as fuel prices and house prices rose. The rise was ahead of economic forecasts of 1.3% coming in at 1.6%. The Bank of England has an inflation target of 2%, if that level is reached it could spark speculation that an interest rate hike is on the cards. Last month there was talk of a cut which goes to show how much can change in the space of a couple of weeks.
This news for the UK economy did not however prevent sterling losing some ground yesterday against most currencies in the afternoon’s trading session. The GBP/EUR rate yesterday morning reached a high of 1.2050 however at the close of business had fallen to 1.1960. This downtrend was mainly put down to the European Union Trade Commissioner Phil Hogan stating that the EU bloc’s ties with the UK will undergo massive changes when the transition period ends, regardless of whether the countries can achieve a deal. He went on to suggest that a free trade agreement will only limit the damage caused by Brexit.
This back and forth rhetoric between the two groups may continue until a trade agreement has been reached between the UK and EU. This could mean volatility for the pound for some time.
The European Union is now discussing its latest budget for the next 6 years after the current 2014-2020 €1.1 trillion budget comes to an end. European Parliament President David Sassoli suggested that following early talks there remains a gap of €230bn in the budget. Germany along with the other frugal four Austria, Denmark, Netherlands and Sweden are all expected to increase their spend which clearly did not go down well.
Once again, the most prosperous countries or “net contributors” look set to need to contribute even more than the rest. This has been exasperated by the removal of the UK from the group with the expected vacuum left looking to be between €12-€15bn per year. German Chancellor Mr Scholz shared his views on the budget suggesting “this is unacceptable”, whilst and Italian MEP Marco Zanni encouraged the EU institutions to “bring an end to idealistic dreaming”.
Clearly for many this was always going to be one of the problems the EU faced after Brexit as only a handful of countries are net contributors. The UK and EU have started to lay out the battle grounds for the trade talks with EU MEP’s today arguing that unless the UK allows EU nations to fish in UK waters there would be no trade deal. Over the coming weeks the EU budget talks along with the start of the Brexit trade deal talks looks set to cause volatility.
Democrat Presidential Candidate Michael Bloomberg, billionaire owner of the Bloomberg empire, appeared in his first debate last night with the other candidates. This is Bloomberg’s first appearance on the stage with the other candidates following his private campaign to get onto the ballot paper. Elizabeth Warren another candidate tweeted before the debate that it’s a shame someone can buy a way in and suggested they will get to see how the candidates can take on an egomaniac billionaire, before they select someone to face trump. Warren during the debate attacked Bloomberg suggesting his record of sexist comments made him similar to Trump and challenged him to release women from Non-Disclosure agreements within his company. All in all, Bloomberg’s campaign didn’t get off to a great start and it looks a difficult path to victory.
In the next few months we will see the Democrat candidate selected and the battle lines drawn. This election will no doubt be as divisive as the last with personal nastiness potentially more of a focus than political policies. Trump is currently considered to be the favourite with opinion polls putting his ratings on par with the highest he has been across his term; this is quite rare for a President in their final year.
Bernie Sanders looks set to win the Democratic vote this year. Bernie was however beaten by Hillary Clinton who went on to face Trump and lose last time round. The election will take place in November.
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