The Pound fell quite sharply yesterday following a call between the PM and Angela Merkel. According to sources close to the call, it was said that a deal would be “overwhelmingly unlikely” in the time involved and within the framework that Boris has laid out. This was then followed up later in the day with Leo Varadkar saying that he’ll work right up to the deadline to get a deal, but won’t do so at the cost of Ireland, Northern Ireland and the EU.

If we don’t get a deal then Boris would theoretically have to abide by the Benn amendment and have to ask the EU for an extension to Article 50. As he’d “rather be dead in a ditch” than do that, it’s tricky to say if he’d try and circumvent it. If he can’t get the deal across and he does ask for an extension then it’s definitely game-on for an election. The Times has an article that says many Conservative MP’s would quit if Boris’ election strategy was based on leaving the EU without a deal. He’s currently facing a bit of a cabinet rebellion over his proposed plans to do so and there are five cabinet ministers who are on a “resignation watchlist” (and surely there must be a limit to how many of your team/party can resign/abscond/elope before you realise it might not be them at fault?)

The other negotiations going from bad to worse are those between the US and China: Before the talks even began this week the US put 28 Chinese companies on a blacklist over their alleged involvement in human rights abuses in the Xinjiang region where China have detained hundreds of thousands of Muslim and ethnic minorities over the last few years. CNN has a good story that goes into more detail. China have demanded that this decision be reversed, but are yet to confirm any retaliatory measures.

 

You may think that this is a bad footing to resume negotiations on and that the timing of such a large sanction is suspect, but we should definitely trust Trump.. in his own words earlier this week he has “great and unmatched wisdom” (and in fact, so much wisdom that he managed 65 other tweets between now and that post on Monday afternoon! – for context, Kim Kardashian only tweeted 13 times in that time) 

Trump’s tweet was following his announcement that he’s withdrawing US troops from North East Syria, which has drawn widespread condemnation. Trump has tried to make assurances that he’s not abandoning the Kurds – who were instrumental in fighting ISIS – but fears are that this would allow Turkey free reign to invade. Trump also made threats against Turkey in the Tweet and then announced the day after that President Erdogan is to visit the US in November!  The Washington Post have a good long read on this. 

Back to trade wars; the new head of the IMF Kristalina Georgieva gave a joint speech with the world bank yesterday and showed forecasts that trade wars will take a $700bn economic toll by 2020. Ms Georgieva also pledged more research into the impact of negative interest rates and urged countries with fiscal capacity to spend more, but to do so in unison as there is a “multiplier effect when countries act together”. The Wall Street Journal has a bit more detail.  

Today we get Federal Reserve meeting minutes to review and see just how serious they are about expanding their asset base. The Dollar remains strong as investors wait to see more on Jerome Powell’s plans to expand the Fed’s balance sheet. Speaking yesterday, Mr Powell said they are intending to undertake some activity, but in no way should this be confused with another round of QE!

Have a great day