Mrs May comes home with news from the trenches

UK Prime Minister, Mrs May arrived home with an agreement for the EU to start putting together their plans for trade talks scheduled to begin immediately after the next Euro-group meeting of EU heads in December. The single-most risk in markets minds during last week`s EU heads meeting, was that Mrs May might have walked out of talks had EU heads challenged her with the blame for scant progress thus far.  She did not walk.  She listened, learned and got an agreement that IF talks on ex-pats, Northern Ireland border issues and possibly, preliminary arrangements for a transition period and of course the thorny issue of the divorce bill, then trade talks could begin while EU/UK lawyers (part of the negotiating teams) could agree technicalities.

On the divorce bill, it is quite clear that EU leaders will be content if the UK just signal which programmes they will want to remain in to enable a running total of the divorce bill be put forward into trade talks where the bill might increase or decrease with a final figure agreed at the very end of talks into March 2019.

Mark Rutte, Dutch Prime minister summed this up by saying;

“I suspect that if they want progress, the British Government will have to tell us at the very least — if they don’t give us a number — how they think they will be able to get to a number, together with Europe. Otherwise we’ll keep going around in circles.” As reported in the Express newspaper:

The UK ambassador to Poland summed divorce settlement thus when talking to the Polish Press Agency:

 “Brexit is a little like a divorce. And in this situation, we’re talking about what the financial situation is before we know which side is going to get the kids. You just don’t do that. That would be a foolish thing to do.”

Investors will have breathed a sigh of relief at the fact that Mrs May did not walk out of talks and that with agreements close on ex-pats, recent break-throughs on Northern Ireland and Mrs May`s stance that there will be NO hard border as such between the North and Southern Ireland, together with the broad acceptance throughout Europe that a transition period would be sensible, Mrs May returned to the UK, not victorious but with an improved sentiment for further talks which are due to start again   The timetable has always been October to December 2017 for Divorce principals to be agreed.  To the wire.

Sterling duly rallied across the board and with talks on-going this week and the BoE interest rate decision getting closer, Sterling in general should be able to consolidate the range.  For this week, data should be the premium as follows:


  • Monday 23rd: CBI Industrial Trends Orders
  • Wednesday 25th: GDP Q3
  • Thursday 26th: CBI Distributive Trades Survey

A light week where the stand-out print is the much awaited 3rd quarter GDP on Wednesday which will almost certainly define Sterling`s week and run into the BoE decision November 4th.

Si Heath
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