Global Themes

Keeping Everyone 'Onside'

  • Not so Fast 
  • Fanciful Statements, Fanciful Plans

UK News

Keeping everyone on board the Brexit Express may prove quite a challenge for Theresa May.  Not ideal, when against a complex economic backdrop.
With the triggering of Article 50 seemingly imminent, Theresa May is desperately trying to avoid a second Scottish Referendum.  Her argument is that until negotiations are completed the Scottish people will not know what they are rejecting.  Nicola Sturgeon’s rejoinder that her government has been excluded from Brexit planning rings hollow, considering the SNP stance has been ‘remain’.  According to Bloomberg, May is set to unveil her regional plans at the Tory Spring Conference this evening in Cardiff.

After all of the excitement surrounding the Fed rate hike, the MPC’s quiet vote to maintain their policy stance doesn’t sound particularly newsworthy.  The meeting minutes however shed some light on their view of the economic situation, and the central assumptions underlying their projections which are key to Sterling’s prospects.  They expect a slowdown in aggregate demand over the course of this year, illustrated thus far by weaker retail sales.  While consumer spending is expected to remain weak, consumer confidence is resilient and business survey projections of conditions continue to show expansion.  

Most importantly perhaps, the diminishing consumer appetite may mean that the MPC’s tolerance for an overshoot of the 2% inflation benchmark might be higher.  Despite one member voting for a 25bps increase in the interest rate, the rise may not be as near-to-hand as the headline numbers indicate. All eyes on the CPI figure next Tuesday…

US News

Be it the news cycle or running his government, Donald Trump has adopted an inflammatory style which might prove too unpalatable for his colleagues and coalition partners.

The furore over ‘Spygate’ – the as yet unsubstantiated allegations that former President Obama ordered surveillance of Donald Trump – has moved across the Atlantic as Press Secretary Sean Spicer quoted a report alleging Obama had requested UK agencies to undertake the spying effort.  The Government Communications Headquarters (GCHQ) followed with a statement calling the statement ‘utterly ridiculous’.  

Perhaps as a by-product of these political missteps President Trump’s approval ratings have fallen recently, according to Gallup, but his budget plans certainly seem to be following his campaign aims.  The defunding of government agencies is unlikely to go unchallenged however, even in the Republican held Senate.  “It is clear that this budget proposed today cannot pass the Senate,” said Senate Armed Services Chairman John McCain, an Arizona Republican.  These impediments will prove a setback to the Reflation Trade, which is reliant on infrastructure investment and the cuts necessary to fund it.

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