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Macro Brief: Let’s talk about…Brexit! Macro Brief: Let’s talk about…Brexit! Macro Brief: Let’s talk about…Brexit!

Macro Brief: Let’s talk about…Brexit!

Macro 4 minutes to read
Christopher Dembik

Head of Macroeconomic Research

Summary:  US consumer sentiment picked up at the end of last week but over in the UK, everybody is still bogged down in the Brexit quagmire.

Last week ended up on a good data for the United States as University of Michigan consumer confidence recovered in March, mostly due to rising expectations. This was a positive signal after a bunch of disappointing data in the US since January, especially retail sales. 
There isn't much to focus in the economic calendar today. The trade balance for the euro area is due early on but it should have little influence on the market.

This week, we will talk about Brexit again. Three days ago, I had a nice talk with a Maltese diplomat working in Brussels confirming that an extension of article 50 is not a done deal. Apparently, a short technical extension could be granted by the EU-27 on the condition that Theresa May’s deal would pass this week.

If it is rejected for the third time, which is likely, the British PM will need to come up with a clear strategy to convince her counterparts: either a general election, a new referendum or a new deal such as the Norway model. It seems that EU officials are sick of attempts from the British to win concessions on the backstop and are reluctant to grant an extension period that would go beyond the EU parliamentary elections. 

So far, the market has not paid much attention to what is happening in the UK, but the situation could get nasty if the likelihood of a no-deal reemerges. It is not my baseline scenario but frankly speaking, it is extremely complicated to know what can really happen with the Brexit process. 

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    Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

    Read article

  • FX: The rate cut race shifts into high gear

    As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

    Read article

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    Read article

  • Fixed income: Keep calm, seize the moment

    With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.

    Read article

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    Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.

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