Political & Brexit Turmoil Takes Centre Stage

UK politics stole the limelight last week as a reckless number of resignations from the Conservative Party casted doubts over Prime Minister Theresa May’s Brexit deal and leadership. Just hours after unveiling her draft Brexit agreement to her party, MP’s including Brexit Minister Raab resigned.

In turn, Thursday saw Sterling face the largest one-day decline against the Euro since October 2016. Bond markets were also shocked, with yields on the 5-year bond contract record its biggest decline since the Brexit vote.

More recently, PM May stated toppling her would risk delaying Brexit and she would not let talks of a leadership challenge against her distract her from a critical week of negotiations with Brussels. To challenge the leadership of the Prime Minister a confidence vote must take place, where lawmakers of the party in power submit votes of ‘no confidence’. The Threshold for triggering a confidence vote is 48 and is yet to be met. May also said changing leadership at this point isn’t going to make it easier.

Taking a backseat, but still impacting markets, were trade tensions between the US and China. Conflicting tones from US President Donald Trump and Mike Pence didn’t provide a clear signal for global asset classes.

In addition, US Federal Reserve members highlighted risks from a global economic slowdown and has markets wagering on whether the US rate hike cycle will soon come to an end.

In the energy space, WTI and International Brent Oil staged a rebound after taking a hammering over recent weeks as well as going into contango. The black gold pared some its losses on the back of the possibility that OPEC members could cut production to prevent another global oil glut.

UK Data for the week ahead

Date

Time (GMT)

DATA

Forecast

previous read

Tuesday 20th

10:00

BoE Governor Mark Carney Speaks

 

 

 

10:00

Inflation Report Hearing

 

 

 

11:00

CBI Industrial Trends Orders

-7

-6

Wednesday 21st

09:30

Public Sector Net Borrowing

5.35B

3.26B

 

 

Public Sector Net Cash Requirements

 

15.846B

Thursday 22nd

20:55

BoE MPC Saunders Speaks

 

 

 

 

 

 

 

Note: Brexit remains the forefront for global markets, especially, UK markets.

 

© Akif SH. Din, AGORA-direct Limited, 19/11/2018

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