Another great example of central bank independence from the Greek ECB man ;-)
from arguing with her European counterparts, PM Theresa May also faces
challenges over Brexit from inside the UK. The first of those goes up in
front of judges on Thursday. The next is due Monday 17th Oct.
not certain how much publicity will be allowed and there's rumours that
the press May be banned from the first hearing but there's nothing
confirmed and I can't see how they will be anyway.
One of the cases could be from SCM Private, a London based investment fund. Details of the cases back in late Sep.
The wheels of UK law go into motion today (not that they ever stop of course, except for elevenses).
The first case to be heard is from Ms Gina Miller of London investment fund group SCM.
case is challenging what's known as the Royal Prerogative power that
Theresa May's government is looking to use to enact article 50. The
simple definition is that it's an age old law that the government wants
to use so it bypasses parliament. The claimant argues that the
government cannot lawfully use this to enact article 50;
review is to be held over three days, today then & 18th and we've
been reliably informed that it's doubtful that we'll get any comments
from the review today as they will be just going over the arguments.
It's highly likely that we may not hear anything until the hearing is
concluded next week.
The review does have the potential
to be market moving if it is decided that there's a case to proceed
with. At this point, this is just to see whether there's merits in the
claims. From there it's possible that it will go on to become something
that will require a full legal challenge.
to Nomura, the market has gone through 5 stages of Brexit grief and has
now settled on a hard exit. Although the market may be accepting that
now, it doesn't mean the end of the drop in the pound.
rhetoric from ministers with "red lines" on immigration has
considerably lowered the possibility of a "Soft Brexit" in the market's
pricing and we have moved more towards the "Clean Break" or "Hard
Brexit" outcome. With the market's acceptance of this it has naturally
seen GBP suffer. But it is more than just that. It has changed the
dynamic we see between UK rates markets and FX that leads us to conclude
that we have not yet seen the bottom in GBP, with portfolio inflows
less likely to provide the necessary inflows to the UK to plug the
current account deficit"
these levels it is less attractive for some to enter fresh shorts, but
given the new market dynamic we continue to recommend selling GBP
initially to 1.20 and further and for EUR/GBP to break above 0.92."
were wary of a 3-4% squeeze before the flash crash but now say that the
decks might have been cleared so that any bounce might not be as big as
there is any rally it should be shortlived and will be used by the
market as an opportunity to sell at better levels unless of course it is
due to a complete reversal of position from politicians on the current
"Hard Brexit" stance."
There's no doubt that
the selling pressure remains and the shorts have the pound firmly by the
short and curlies. The short term charts are still developing and last
week's lows around 1.2080/1.2100 will be the first target for another
attempt at pushing the pound a whole lot lower.
also been told by banks that they will move some operations to
Frankfurt and he expects them to start doing so in the second half of
the hard and soft facts and the myths.
As part of
Project Fear David Cameron threatened that he would trigger Article 50
immediately if there was a Brexit majority in the referendum. At the time this
was interpreted as a "Hard Brexit". Theresa May has gone for the "Soft Brexit"
which means that after 10 months of careful negotiation the UK will trigger
Article 50 by March 2017. There should be no further reference to "Hard Brexit"
as this is as soft as it gets.
are well into the discussion stage of leaving we still hear siren voices
telling us to reverse our decision and stay in the EU. Clutching at straws
there is a strong lobby saying that we cannot exit until it has been debated in
Parliament and voted for by our elected representatives. This is in spite of
the fact that the referendum was undertaken to tell our elected representatives
the will of the people. In one sense it should be a nod through for Parliament,
but a lot of people are concerned that if this decision is left to our elected
representatives then it will be overturned as every piece of weak news about
the UK economy is attributed to the decision made to Brexit and all but a few
politicians are likely to be led by their own self-interest.
politicians are blowing-off steam about how more evidence has now come to light
that Brexit will be bad for the UK economy and in the best interests of their
electorate they feel they must now vote against Brexit. A politician`s life is
short and full of risk and most of them will fall off the gravy train long
before their working life is over and it is nice for them to think there is
another lucrative gravy train to jump aboard and this incentivises many of them
to justify a volte face.
As well as
the politicians, the backroom bureaucrats are missing the point about leaving
the EU. I spoke to several top members of HM Customs and Excise who are off to
Luxembourg this week to unravel hundreds of pages of trade agreements before
they can restart the process of renegotiation. I asked them why we are not just
scrapping all trade agreements which interfere with price or quantity and why
we are not offering free trade across the world. Starting with a clean slate
will allow us to deal, case by case, with any problems that manifest themselves.
There was a stunned silence. This approach could apply equally to all EU
countries with whom we will continue to trade freely and if the EU does not
want to play the free trade game then they need to look at the cautionary tale
chocolate, cheese and wine myth.
Clegg has pointed out that the price of EU cheese, chocolate and wine will soar
if we go for a "Hard Brexit". I think we need to ask the consumer about this.
As there are many substitutes for EU cheese I can see a win/win for the UK
cheesemakers. Wines from around the world including England are as good if not
superior to EU wines and Swiss chocolate is my favourite. So what will actually
happen is that EU producers will be forced out of the UK market or they will
have to absorb the tariff. EU producers will in turn put pressure on the EU
policymakers to remove all tariffs as the only people who lose in this
situation are producers in EU countries.
falling value of sterling myth.
the noise about Brexit and it has been clear for some time that sterling is
destined to fall and continue falling in value. I explained this before Brexit
in my blog "Current account deficit on
the balance of payments is the most damming statistic". At present this
deficit is 7.6% of our GDP and the market will bring down the value of the
currency, as did the lowering of Bank Rate by the Bank of England, until our
export prices are sufficiently low and import prices sufficiently high to
rebalance our external account. Daily fluctuations are determined by rumour,
manipulation and misinterpretation of current statistics. However in the long
run it is the current balance deficit that points the currency in a downward direction
and the sooner it happens the quicker the problem is resolved. If fear pushed
the currency lower quicker after Brexit then we need to look upon this as good
Brexit induced rise in inflation myth.
said inflation is always and everywhere a monetary phenomenon. Inflation is more
units of a currency used in the same number of transactions. A falling pound,
rising import prices, higher food or oil prices only change relative prices.
For the average level of prices to rise there must have been a preceding growth
in monetary demand. The prices described above are only symptoms of the
inflation caused by the Bank of England`s monetary policy more than a year ago.
and the Stock Market boom myth.
have claimed the Stock Market boom as a success but, as much as I would like to,
the real advantages to economic growth of Brexit are sometime ahead. Asset
prices hitting a peak is just the inverse relationship between interest rates
and asset values. The Bank of England lowering interest rates has caused asset
prices to rise and it will be reversed when interest rates start to rise.
Brexit has had nothing to do with asset bubbles. They are the result of a misguided
Central Bank policy as I explained on my blog in "A reappraisal of interest rates and market interest rates"
The pound has dropped but be careful as Bloomberg headlines of late have been very iffy on conjecture.
Further details now;