Macro Brief: Brexit soap opera continues
Head of Macro Analysis
Summary: The ongoing Brexit saga has offered a great deal in the way of political spectacle, but little overall direction.
In addition, US inflation was out lower than expected (both headline CPI and core CPI) which was considered by forex investors as mildly dollar-negative since it broadly reduces pressure on the Federal Reserve to normalise monetary policy.
Today’s focus will be on Brexit again as the Parliament is expected to vote on whether to leave the European Union with no deal, which will likely be rejected as well. Then, MPs will vote on whether to seek an extension of Article 50, which will probably pass on Thursday. It does not mean that the Brexit soap opera will end anytime soon since PM May will need to go back to Brussels to ask the EU-27 for an extension, which is not a done deal.
In other words, the GBP should see a choppy ride in the coming days. Today, EU ambassadors should also discuss Brexit in Brussels. Elsewhere, one of the most important data releases will be US construction spending in January. Consensus expects an increase of 0.4% versus -0.6% prior. This good figure should mostly result from an increase in nonresidential construction while private residential construction is expected to continue declining.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)