Hopes for Brexit Deal Rise ...
Markets rallied, the Pound soared, as hopes for a Brexit deal seemed possible at close of the week. A wave of optimism pushed the FTSE 250 up 500 points, Sterling closed above the $1.26 level from $1.23 last week.
Britain and the EU have agreed to intensify discussions and to enter the "tunnel of talks" that may lead to a solution. The alleged progress followed a meeting with Boris Johnson and Leo Varadkar, the Irish Prime Minister on Thursday.
The meeting was held at Thornton Manor in Cheshire, described as a "luxury wedding venue". Love was in the air and fudge was on the menu. Boris Johnson has resurrected plans drawn up by Theresa May for a customs partnership between the UK and the EU.
"Northern Ireland, effectively stays in the EU's customs union but for the purposes of trade it's the UK's customs union". Under the plan Britain would collect tariffs on behalf of the EU for goods ending up in Northern Ireland but companies could claim rebates on goods sold on into the EU area including Ireland. Furthermore, Northern Ireland will be able to take "full advantage" of new trade deals Britain signs after it leaves the EU trade bloc."
Don't throw the confetti just yet. No thought of the rules of origin, or the contradiction of an inside/out agreement. Not much can have been achieved in the two hour meeting. The EU and the UK have agreed to intensify discussions over the coming days ... and months and years ...
As for the Sterling rally, the move through heavy overhead resistance at $1.25 was a bear squeeze leaving the shorts struggling for cover. By start of week, the honeymoon will be over for travelers in the tunnel of love. Travelers to the EU and beyond should expect to pay more ...
Hopes For Trade Deal Rise ...
In the USA hopes for a trade deal were on the rise as President Trump met with top trade official Vice Premier Liu He. The US and China struck a tentative "Phase One" deal.
China will commit to buy up to $50 billion more of Agricultural products, the planned increase in tariffs on Chinese imports next week, have been put on hold. Additional agreements were reached on intellectual property protection and financial services.
Trump was optimistic. Advising U.S. farmers to buy bigger tractors. "There is nothing bigger than what we are doing with China" "There has been friction between the two sides but now it's a love fest, we will have a great deal that is beyond tariffs."
China Daily welcomed the move, creating as it does a "badly needed breathing space for both sides to reflect on the bigger picture". Some were more cautious. Trump can be fickle. The Chinese had done nothing to assist the Normandy landings. A cruel test of loyalty in White House world of foreign relations, to which the Kurds can attest.
The mini deal brings relief to farmers but offers no long term solutions. American businesses and consumers continue to pay billions of dollars more for imported goods. The uncertainty persists as agents lobby for product exclusions from the random product list.
Trump talked of a comprehensive deal but achieved a tiny truce and declared victory. Markets rallied but surrendered gains, the Dow closed 320 points higher from an initial 500 point romp. Trump's trade tactics are threatening the jobs of those who voted for him. World leaders are warning of a slow down which could spread from trade and manufacturing into financial and service sectors.
The Federal Reserve moved into action, with a commitment to buy $60 billion of Treasury Bills over the next thirty days. The purchases will continue into the second quarter of 2020. "This is not QE " explained the Fed, "It is a move designed to improve short term liquidity conditions".
The Fed is worried about White House policies. In the USA there is no recession coming, the Federal Reserve will make sure of that ...
Hopes For Impeachment Rise ...
How likely is it Trump will be on the ballot in 2020? Jennifer Rubin writing in the Washington Post this week asks the question. It has been a tough week for the President.
The impeachment enquiry is accelerating. More whistles are heard in Washington. The revelation of deep state concerns on Trump's calls with foreign leaders increase.
The courts have ordered the release of Trump's tax returns. The latest Fox news poll has approval ratings deep in the red. 55% disapprove, 47% disapprove strongly. Among female voters 56% disapprove strongly.
This week we learned Trump ordered the withholding of aid to the Ukraine in exchange for help to dig the dirt on Joe BIden and Son. In this Trump could see nothing wrong, he had asked many other countries for similar help including Australia, the UK and China.
In the House Trump would fall to the impeachment debate. The Democrat majority will suffice. In the Senate, a two thirds majority is required. The Republicans, it is thought, will stand behind their man. Really? This week GOP support was tested as the President made a brief call with President Erdogan and agreed to pull U.S. troops out of Syria. Overnight the tanks rolled into Kurdistan. The U.S. abandoned a close ally.
Trump explained the Kurds had done little to assist the US in the second world war. They had not been present at the Normandy landings. No landing craft in land locked Kurdistan was no excuse. Senators on both sides of the Senate were outraged by a clear betrayal.
Trump was unbowed. He had made a commitment to bring the troops home. 50 special forces troops left the Syrian battle zone. "Moving into the Middle East was the worst decision we ever made", Trump tweeted on Thursday. By the end of the week, 2000 were on their way to Saudi Arabia ...
That's all for this week, have a great weekend. We will be back with more news and updates next week!
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for FREE weekly updates on the UK and World Economy.
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