Tags: Brexit | uk | investors | brexit | political | noise

UK Investors Won't Overreact to Brexit 'Political Noise'

dollar and pound - banknotes and coin.
(Roman Romaniuk/Dreamstime)

By
Wednesday, 16 January 2019 11:30 AM Current | Bio | Archive

The process of getting the UK to leave the European Union (EU) remains tedious and interminable.

The UK government was defeated yesterday on its withdrawal agreement, which was expected, with less than a third of the UK Parliament backing the deal (202 yes and 432 no), which was not expected.

The government now faces today a vote of no confidence, which current indications suggest it will win.

There are now two questions from this. Neither are interesting questions because there is nothing interesting about this whole process, but there are questions nonetheless.

The first question is what the opposition Labor Party will do in the event that their no confidence motion in the government fails.

According to the Party conference, the Party leadership should then back a second referendum. This is not the favored option of Jeremy Corbyn, the Labor Party leader who is not exactly a fan of the European Union, The Guardian reported.

If Corbyn fails to endorse a second referendum, then the divisions in the Labor Party are likely to be more apparent and raise speculation about some people in the Labor Party defying the leadership in the future.  

The second question is “What happens next?”

There is a statement to Parliament on Monday that it is clear that a couple of minor tweaks to the withdrawal agreement are not going to be enough to change things.

The European Union is saying that no renegotiation is possible, invoking the time on it British political maxim, they would say “Wouldn’t they?” For now, it seems quite likely that the exit will have to be delayed in one way or another, a move that will require Parliamentary agreement on which the government is still claiming will not happen.

However, March 29 as an exit date was only likely if the government’s withdrawal agreement had succeeded.

Finally, there has been a great deal of indecision and volatility in the UK political sphere, but this is as nothing compared to the indecision and volatility in the trading of the British pound, which managed to selloff fairly dramatically and then rebounded back to where it had started from within minutes of the vote.      

For investors, it is worth noting that the funding of the UK current account deficit and thus the overall level of the British pound (Sterling) is largely accomplished by UK investors who, to the extent that anyone can understand UK politics, are less likely to overreact to UK political noise.

Remarks From Fed Speakers Yesterday

While it’s day 26 of the U.S. government partial shutdown, more employees are being brought back without pay, NPR reported.

In the meantime, Kansas City Fed President Esther George, who is generally seen as being on the hawkish side of the Federal Reserve’s spectrum, gave a prepared speech that contained several interesting remarks.

George said: “I cannot give an exact answer to how close we are to a neutral setting for interest rates …  The truth is that a vague “we’re getting close” may be the best response I have to offer … We have likely not yet seen the full effect of higher rates on real economic activity or inflation. A pause in the normalization process would give us time to assess if the economy is responding as expected with a slowing of growth to a pace that is sustainable over the longer run … It is possible that some additional rate increases will be appropriate. But making that judgment is not urgent.”

George's statements were echoed by Dallas Fed President Kaplan, who said the Fed should wait at least “a quarter or two” before raising rates again. Reuters reported.

These statements are important for investors as they fit with the idea of a couple more Fed rate hikes this year, but just not yet.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
HansParisis
For investors, it is worth noting that the funding of the UK current account deficit and thus the overall level of the British pound (Sterling) is largely accomplished by UK investors who, to the extent that anyone can understand UK politics, are less likely to overreact to UK political noise.
uk, investors, brexit, political, noise
649
2019-30-16
Wednesday, 16 January 2019 11:30 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.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved