Morning Brief – Thursday 2nd

A Matter of Global Importance

It’s time to talk planetary defence. I’d be surprised if the coveted FEMA-NASA research event that has unfolded this week is not already at the forefront of your mind. However, if the 13th page of the free London newspaper the Metro or the ‘Strange’ tab of Sky News hasn’t grabbed your attention, fear no more, we’ve got you covered.

NASA, the National Aeronautics and Space Administration, estimates that there are in excess of 19,000 asteroids in close proximity to the earth. A joint venture between the Administration and the Federal Emergency Management Agency this week will produce a model of the devastation that the impact of a celestial object upon earth would produce.

Investigating similar events to those which are thought to be what caused the extinction of the dinosaurs some 66 million years ago, as with most things, the model can be explained with Brexit!

Brexit and Planetary Defence

The joint venture has come up with three solutions to a potential collision: steer the asteroid away from impact with earth; blow it into smithereens; let it hit but get people away.

Steering the asteroid – soon to be meteor – is what I’m going to call the Conservative-Labour compromise. By attaching an external body to the existing threat, one with its own momentum and force, we can change the path along which both bodies will travel.

As the Conservative party hurtles towards the deadline of Brexit, the attachment of the Labour Party can still achieve compromise and change the path of Brexit. Will the move be enough to avoid earth? Who knows, but at least as far as planetary defence is concerned, this is the favoured option.

Option two is to blow the asteroid up into millions of smaller pieces that, it’s hoped, wouldn’t present the same threat as the larger body. I call this the indicative votes option and May’s present Plan B.

If May’s talks with Labour fail to produce a majority behind a new Brexit comprise then the incumbent Prime Minister has promised to offer the Commons a series of indicative votes. These so-called ‘free’ votes are not governed by party whips or loyalty but rather ask Members of Parliament to vote based on their own individual preferences.

This resembles the blowing up of the comet, the destruction of it’s whole, removing its integrity, in favour of fragmentation where each constituent part contains less force than the whole. NASA has told us this week that this plan probably wouldn’t work. Instead, succumbing to the force of gravity, the pieces are likely to amass once again, reforming as a complete asteroid within the Earth’s atmosphere. So, Theresa May, perhaps you can split the party up into its component parts, but would the same old stagnation come back to haunt your Brexit plan? Well, NASA might think so.

Plan C – run and hope for the best. Move people out of the way of destruction and hope for the best, or hope the thing goes away? May has tried this throughout Brexit negotiations, kicking the can down the road achieving minor concessions in order to just about cling to office. Might hoping it all just goes away perhaps even suffice as a metaphor for the option of a second referendum?

The Pound has been trading strongly in recent days as a stronger appetite for risk leads investors to hold UK assets. As the Bank of England publishes its monetary policy decision this afternoon, the composition of voting within the Monetary Policy Committee will be important to understanding the Bank’s interpretation of the domestic economy. No hike is priced in for today’s event. Last night the Fed held its cautious tone on US monetary policy. The press conference lifted the Dollar off of its session lows while Chairman Powell hit back against President Trump’s desire for a rate cut.

Discussion and Analysis by Charles Porter

Click Here to Subscribe to the SGM-FX Newsletter