Global Themes

Markets mixed as uncertainty remains 

  • Merkel suggests euro is too low for Germany   
  • French election opens up after all candidates slip up
  • Kraft pulls away from bid for Unilever 
  • Lords prepare to debate Brexit Bill


Merkel suggests euro is too low for Germany 
“We have at the moment in the euro zone a problem with the value of the euro … The ECB has a monetary policy that is not geared to Germany, rather it is tailored to countries from Portugal to Slovenia or Slovakia” the Chancellor remarked at the Munich Security Press Conference.

Although these comments were seen as a rebuttal to other recent comments about the level of the Euro by Peter Navarro, trade adviser to President Trump, they only deepen the divide between Germany and the rest of Europe when it comes to current policy and the level of the currency. They will also add even more pressure onto the shoulders of Mario Draghi ahead of the next ECB meeting in March. Various German officials have been vocal in suggesting the ECB should be considering reducing its bond purchase programme and considering higher interest rates. 

French Election

French election opens up after all candidates slip up
Latest polls show Le Pen maintaining her lead going into the first round despite allegations that she gave her aides fake parliamentary jobs, Macron slipped slightly following a comment on a trip to Algeria, when he said that aspects of colonialism could be considered a crime against humanity.

Leader of the Front National, Marine Le Pen is also still the clear leader in the polls, with an expected 26% of the vote in the first round. Emmanuel Macron has slipped back to below 20%, the same level as former favourite, Republican Francois Fillon. All candidates except Le Pen have seen their numbers drop over the last few days, raising the spectre of populism once again. One key feature of both political events last year (Brexit and the US election) was the strength of feeling, matched by conviction to vote, of those voting “against the establishment”. Le Pen is also widely expected to lose the second round according to polls currently, however any shift upwards in her chances would start to weigh heavily on EUR. 


Kraft pulls away from bid for Unilever
US Kraft Heinz saw no option but to drop its plans to bid $143bio for Unilever after the Anglo-Dutch company’s management firmly rejected the idea. Warren Buffett, a large investor in the American company, is famously adverse to hostile takeovers.

The bid was in its infancy and almost certainly no hedging would have been done, so the “direct” currency impact will be limited. The psychological overhang may keep GBP on the back foot however. 


Lords prepare to debate Brexit Bill
Over 190 members of the Upper House have requested to speak over the two days allotted for debating the bill before it gets voted on next week, something of a record. Over the weekend a few Lords have suggested amendments could be suggested, potentially delaying the bill. It is seen as unlikely the House would ultimately block the bill however, the Lords are unelected and it could be taken as a challenge to the will of the people.

Amendments most likely are about rights for foreign nationals and a legal vote for Parliament to finally ratify any deal with the EU. The Lords do not have the same “party system” as the Commons, with a lot more independents. Strong soundbites during the debate could add to volatility in GBP. 

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