Tags: investors | brexit | trump | may

For Investors, the Brexit Saga Is Far From Over

For Investors, the Brexit Saga Is Far From Over

Monday, 16 January 2017 10:15 AM Current | Bio | Archive

Today, as it’s Martin Luther King holiday in the States, U.S. financial markets are closed.

Over the weekend, the big news and more specifically political news has been related to Europe with in the United Kingdom markets awaiting the speech of Prime Minister May that is due tomorrow, Tuesday January 17.

The contents of that important speech have been effectively leaked in advance and the Daily Telegraph writes, and I quote, Prime Minister May is expected to say that Britain must: Be prepared to leave the customs union to secure free trade deals across the world; Regain full control of its borders even if that means ending single market membership; No longer be bound by European Court of Justice rulings after Brexit, despite claims to the contrary; Unite after the “division” of the referendum by ditching the terms “Leaver” and “Remainer.”

If Mrs. May’s speech tomorrow doesn’t differ that much from the leaked version then we can presume that with the UK then definitively set for leaving both the single market and the European customs union there will be no doubt that Brexit will be nasty, brutish, if not particularly short. By the way, the Sunday Times reported that Brexit could be delayed to late-2019.

No, the Brexit saga is far from over.

Markets in Asia and Europe already have shown heightened sterling volatility that has, and this is important, the potential of impacting the broader markets as we see already sterling falling and the U.K.’s benchmark, the FTSE 100 is hitting fresh highs.

Investors could do well keeping in mind that the U.K. is dependent on capital inflows to finance its deficit, and that may be considered a polite understatement.

Besides that, already in early December, Brexit Secretary David Davis suggested that Britain will cut taxes and take on the EU if it tries to ‘punish’ the U.K. for its Brexit.

If that were to happen there is no doubt that this would also have negative consequences on the value of sterling.

Also over the weekend, and yes, this could be historical, U.S. – EU diplomacy may have undergone something of a setback.

Germany’s Bild newspaper carries an interview, hold in the Trump Tower with the President elect in which he predicted that the U.K.’s exit from the EU would be a success and that other countries would follow the U.K. out. He also said, if they hadn’t been forced to take in all of the refugees, so many, with all the problems that it ... entails, I think that you wouldn’t have a Brexit. This was the final straw that broke the camel’s back ... I believe others will leave. I do think keeping it together is not gonna be as easy as a lot of people think.”

Trump also said that he is indifferent as to whether the EU stays together or not.

Trump also called NATO obsolete. NATO was of course established primarily in opposition to the Soviet Union, so its relevance to obsolescence perhaps partly depends on the perceived threat of Russia.

He also directly criticized German’s Chancellor Merkel’s policies.

The tone, rather than the content of the interview has been perhaps the more relevant factor here.

With only 4 days to go before the inauguration it’s a fact that Mr. Trump’s tone is still very much that of candidate Trump.

The market expectation that President Trump would undergo some kind of metamorphosis from the person on the campaign trail is looking to have a lower probability.
So far at least, it all looks like Trump will remain Trump and therefore uncertainty will remain.

Now, if that uncertainty causes investors to wait and see before committing to invest in the United States, then there are clear risks in the currency markets.

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments.

© 2019 Newsmax Finance. All rights reserved.

1Like our page
Today, as it's Martin Luther King holiday in the States, U.S. financial markets are closed.
investors, brexit, trump, may
Monday, 16 January 2017 10:15 AM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved