Morning Brief – Monday 26th

Deal!

Brexit news has not been hard to come by this weekend. Numerous speeches from the UK Prime Minister, Theresa May, both in Brussels and in Westminster today, have shed a lot of light on Brexit. However, one thing that has been clear for weeks remains transparent; getting the (now agreed) deal through UK parliament is a task that seems insurmountable. In order to persuade a lower house majority to accept the deal it would be necessary to persuade several key interest groups to back an arrangement that at present seems unpalatable for them. Whilst waning Brexit sentiment has also hindered the Euro, evolving sentiment surrounding the fiscal intentions of the new Italian coalition have afforded European assets room to appreciate. Despite tensions escalating throughout the weekend between Rome and European institutions, news this morning from Matteo Salvini allowed Italian risk sentiment to improve. Accordingly, the spread between German bunds and Italian ten-year debt that had widened throughout the weekend, found room to recover. This technical move has improved sentiment behind the Euro and allowed it to appreciate. Amidst political turmoil throughout Europe, global risk sentiment and impressions of global growth soured. This allowed the US Dollar to catch yet another bid driven by defensive demand and investors’ hunt for a safehaven. It has been announced this afternoon that parliament will meet on 11^th December in order to vote on May’s deal. With May’s European counterparts having signalled over the weekend that this is the final deal and it shan’t get any better than this, everything is on the line for the December meeting. May’s campaign to convince Members of the House of Commons to back her deal is well underway with investors unconvinced of whether the Parliamentary arithmetic can be swayed into May’s favour.

Discussion and Analysis by Charles Porter

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