This is a crucial week for financial markets with several major central banks announcing monetary policy, including the Federal Reserve, the Bank of England and the European Central Bank. Along with inflation data for the UK and US there are likely to be some significant moves seen. On top of that there will be continued focus on Brexit negotiations. We look at the implications for forex, equity indices and commodities markets.
I am by no means Theresa May’s biggest fan, but for all her numerous political mistakes of 2017, she must have remarkable resolve of character. A calamitous snap election resulted in a lost Parliamentary majority and a minority Government propped up by the Northern Irish unionist DUP. For months speculation has been that Mrs May’s weakened position would eventually cause her to fold. However, somehow she has survived, despite pressure from scheming cabinet members (such as Johnson and Gove). Last week, her initial attempts to strike a deal with the EU over its three red lines (divorce bill, EU citizens’ rights and the Northern Irish border) appeared to fail as DUP leader Arlene Foster pulled her back over the border issue. Failure to agree a deal because the tail was wagging the dog would surely cost Mrs May any remaining credibility and/or her job. However, somehow she has managed to square the circle over the Northern Irish border, enabling no hard border (in everyone’s interest), and promising a UK-wide policy (vital to retain Foster’s support). How this works in practice (especially if and when the UK look to change their customs rules post-Brexit) is for another day. For now, even Jean-Claude Juncker was complimentary towards Mrs May. Sterling performance will remain linked to Brexit progress and should be underpinned in the coming weeks as negotiations can now move on to more important transitional agreement and trade talks.
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