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‘A real deal or no deal at all’ – Donald Trump

By Hamish Muress

So the whole Brexit debate within the Houses of Parliament did not get off to a great start for Theresa May and her government. Yesterday the government suffered three defeats on a range of items from issuing the legal advice provided by the Attorney General but probably more importantly they lost a final vote that will allow Parliament to wrestle control of the Brexit process should the Government loose the key vote next Tuesday (which is highly expected). Interestingly the DUP which props up May’s minority government voted with the opposition (no surprise there).

Elsewhere Mark Carney defended his analysis and forecasts that were released last week. Carney explained that a range of scenarios were examined over the last few years and it was not just the worst case scenario that was put forward.

All in all it was not a good day for the pound but any upside relief will be tempered until next week.

The confidence expressed from Beijing regarding the negotiations with Washington on the trade tariffs may not have spilled over in to the Asian equity markets and the USD has struggled to hold its level ahead of today’s market closure due to the day of mourning declared for former President George Bush. US equities have followed Asia’s in dropping off and this may be due to the confusion circling the markets as to the position between the US and China. Donald Trump stealing a line from events here in the UK tweeted that ‘We are either going to have a REAL DEAL with China, or no deal at all’.

So it would appear that Emmanuel Macron the French President has decided to make a u-turn and suspend fuel tax rises that have led to violent protests across the country. In fact it was the Prime Minister Edourd Phillipe who announced the change in policy demonstrating the unusual nuances of European presidential politics. Interestingly as well, this story spills over into the situation currently ongoing in Italy with regards to its budget. The Eurogroup late last night who were meeting to discuss the Italian budget also highlighted that 5 other European countries are set to fall foul off the budget rules for 2019. By not raising revenue through fuel tax hikes, France it would appear may also struggle to bring its budget deficit in line.

The Aussie dollar is struggling at present and follows the lead of Chinese/US equities as it fell off due to concerns over how much progress and agreement there was at the recent G20 summit between China and the US. GDP for Q3 hasn’t helped things either as it was a big miss coming in at 0.3% vs 0.6% as expected. The RBA as mentioned yesterday do not meet again until February which means any reprieve for the Aussie may not be imminent. Even the absurdly high inflation forecasts from the RBA will provide much hope.

The Bank of Canada interest rate decision in imminent but the consensus and expectation is for rates to remain on hold at 1.75%. The central bank have hiked rates 5 times since May 2017 but may be cautious for a while due to the shocking drop recently in oil prices. This is likely to suppress Q4 growth as well.

Finally a positive result on the Global Dairy Trade auction for New Zealand as prices across the board rose 2.2% (although the price of cheddar dropped 2.2% respectively which will be welcome news for many a cheese board in the run up to Christmas). The Kiwi is still enjoying some of its recent gains and is a long way from the lows seen in October.