60 years later, the beginning of the new EU

Speaking of the FM, Boris Johnson, there is a meet today with his German counterpart, Sigmar Gabriel.

The leaks suggest that there will be talk of “no divorce” and “positive discussions” coupled with memories of healthy German/UK relations pre EU.

All sounds positive, again will be interesting to see if GBP notices.

The EU parliament approved the EU negotiating guidelines with a list of ‘red lines’ - nothing much sensational, mostly positive including a commitment to preserve a soft land border EU/UK.

UK PM hinting on rolling back on EU immigration stance, Nigel Farage not drinking any more French wine, eating Belgian chocolates or driving Mercedes or BMW’s - nothing very exciting.

Yesterday J Weidmann, in a German newspaper, said that it’s time to take the foot off the QE gas. The timing is perfect, M Draghi giving a speech today.

Let the games begin, the numbers are helping Weidmann’s cause, so maybe a sign up ahead of some Euro buying.

Draghi may well be negative, but for how long.

Dragi will stick to tze promised for now. QE staying the way it was statet in last statement. everythibg else would make the ECB unreliable and less trustworthy.

Weidman giving statements to prepare the audience for other changes. maybe a hike in interest rates this year. maybe a hike in deposite rates for banks. who knows? untill they have theor speeche noone knows and guessing is like gambling.

the perspective for the euro is a increse in worth in my perception.

i already talked with a circle of friendly traders in private. in my opinion the eur/usd will rise this year towards finishing the year around 1.20+. till 2020 i see the eur/usd around 1.4 and in the very long run i am very confident that in the next crisis the eur/usd will reach tops of 2.0.

you may ask why? one among many factors is the gap that needs to be filled after brexit. many new jobs across many industries will move into the EU. Even a lot of eu institutions need to be relocated out of the UK and into the EU. this creates a lot of “euro”-jobs and according to statements of brussel amd berlin- struggeling euro countries will have a bonus when the relocation of this EU institutions will happen- creating jobs in these countries.

the second remarkable reason is that the euro, compared to usd, has a very low dept rate. the average dept of the european countries is at 80% of the european GDP. while usa is at 120%- and is planing (Trumps economic program) to increase this dept by anotger 20-30% in trumps 4 years president time.

the eurosystem has big growth potential in the banking sector. compared to other banks and locations like usa japan and uk- the european banks had a struggeling time over the last 9 years. mainly due to the fact that european banks operate in a different business model than uk and us based banks- their margin shrinks when the central bank lowers the basic interest rate. once the hike of interest rates starts in the EURO-zone banks will be more profitable adding to the security the euro is guaranteeing since years.

third of many reasons is the shift of pegged currencies. the counzries that pegged/are pegging their currencies to the dollar are decreasing in big nunbers. if i remember correctly around 19 countries stopped pegging their currency to the usd. euro pegged currencies thou are increasing and many countries will adopt the euro within the next 5-10 years. countries with a dept balance of 15-30% of gdp. adding to the worth and security of the euro.

call me crazy but in a few years- that im sure of- we will see a euro/usd of around 2.0.

Draghi was as expected, Weidmann continued the charade with another ‘end the QE’ speech, the games have begun.

Week 1 now complete, seems the UK guys have just wakened an are smelling the coffee, the BOE sent out a little reminder on this last day of the first week of the new EU27:

http://www.bankofengland.co.uk/pra/Documents/about/letter070417.pdf

(PRA is as per the letterhead, FPC is Financial Policy
committee :Financial Policy Committee | Bank of England)

Sentix released today:

https://www.sentix.de/index.php/en/sentix-Economic-News/the-situation-in-euroland-continues-to-grow.html

Snap election call, Piponomics covers it well in his blog here:

Brexit Update: Theresa May Calls for a Snap Election

One extra thing, likely the answer to why now and why the U turn and why there was some Stg buying.

According to article 50 the time frame for the negotiations is two years, so a deal supposedly wrapped up by end of March 2019, just in time for the forced election of May 2020.

The realization has dawned that two years will not cut it, to force that will force a hard break, failure to complete the break by late 2019 would hand the UKIP a windfall, a massive stick for Tory beating.

The PM has bought an extra couple of years, taken away a possible leverage for the 27 and likely add to her majority thus de-leveraging the hawks in her own party.

Note that I mentioned the coffee smelling back on April 7th, these negotiations will be extremely difficult, time was not on the UK’s side, it is now.

Btw, missed by many was a statement issued today by the EU Commission:
[I]
European Union agencies must be based in the EU. The decision to relocate EU agencies based in the UK is not part of the Brexit negotiations[/I]

More on that statement and the reason for it’s issue here:

There is the tiny possibility that the ruling party will lose the election…

Very unwise.

Ukip are finished, this is a scandal, fudging the issues facing Britain’s “GOP” with a call for a longer mandate than one potentially ending in 2020.

Sterling buying is again a farcical thing to try to explain,just like the expectation that an inverse correlation with the Ftse100 is unmovable, and it is utterly irresponsible to ask people’s vote so close to the local elections and with a refusal to debate in true electoral campaign style with other parties on public media.

This whole mess is so bad and the PM’s logic so fuzzy that it beggars belief…

I agree, deliberately didn’t offer my own opinion but for what it is worth it reinforces by belief in the huge difference between Churchill and May.

Churchill was a man of many words, he was also a man of his word.

May has said that the ‘Union’ is close to her heart, told the Scots that clamouring for a vote when important EU talks were beginning would be to the detriment of the UK as a whole.

Also said that NI was important to her thinking, right now when there are ongoing inter-party talks trying to get the peace process back on track those same parties have to go into election mode.

She is of course taking a huge gamble, I heard it said that a week is a long time in politics.

Some of the banks are suggesting a reversal on GBP and that now could be the time to buy, Barclays think it is undervalued by 11% - difficult to comprehend this thinking.

I wonder what will happen if her party does lose the election. There will be major consequences, but how far-reaching will they be?

The gamble is that Lib Dem gains will be countered by Tory gains and further Labour losses - Corbyn is an old timer, he knows a little about campaigning, there is a distinct risk that his message of being pro people and anti establishment will strike a chord with voters.

Likewise Lib Dems have already demonstrated their renewed voter attraction in a recent by-election.

Former UKIP leader is deciding whether to stand, likely he will not.

The PM may well do another U turn on TV debating, she will be advised that an empty chair would be negative.

Like I say, the risks are huge - all to gain two years.

He decided not, told the Telegraph that he would have had an “easy win”, but reckons that he is needed much more as an MEP in Europe.

I’m making no comment - Mr Farage does enjoy a good laugh from time to time.

At the week close the UK election is the headline grabber, seems the Lib Dems have raised 500k in 2 days, likely UK business money.

Behind the headlines the 27 are quietly moving ahead thinking of their own interests and setting the wheels in motion, as Pres Trump would say ‘Europeans first’.

Leaders of Holland, Denmark and Ireland had a little get together today. Unity among the 27 was to the fore, I suspect that any attempt to divide and conquer will fail - surprising as that may sound when thinking of the EU27.

Holland has made a formal request to host the EMA (European Medicines Agency) - the personnel number of 897 is not important, nor is the lower number for the EBA (European Banking Authority) - all staff will be assured of continued employment if they wish to move to EU27, there is a much bigger fish to be cooked, that will come later.

What those elections mean for Pound? Why it rose? A hope that grabbing more seats in the party will facilitate the process of exit and pushing through important bills easier without much resistance from opposition?

The snap election has nothing to do with the Brexit. Thats just the trick London is using right now.

The snap election is designed to prohibit a possible scottisch refferendum. If the tories can collect enough voices from scottland they can use this voice count as justification and the legitimation to not allow scottland to have a seccond referendum. even thou the second referendum passed the scottisch parliament- for it to happen london still has to agree to it.

A tory vote in scottland would give May the power to simply say no and put as reason “yes the SNP may be the leading party in scottland, but look the scotts have voted for the tories and they obviously agree to our politics and our brexit politics, so we do not see it necesarry to have a second referendum about scottland leaving the UK”.

Political games instead of solving problems. Thats what UK is doing since 2 decades. Thats whats leading into new problems over and over again. the fight for power is more important the the fight for a better future. That is the root of problems like brexit or scottisch independence referendum etc.

Absolutely…

And Scottish Labour have changed leader twice in two years, so they are as weak as their English counterpart in opposition.

I agree, the Tories are doing some awful things, like the ‘rape clause’ and more cuts to social security as well as ti community care, and their obsession with first ‘free schools’ and now Grammar Schools.

Sadly it is not just the Tories who damages this country, but at least under Blair the incredible NHS investment really did cut down waiting time for operations etc. Blair came into office with a clear vision about education, and indeed the Music Manifesto, for example, really put money into music classes and instruments access for children in schools… Of course, a lot of it was fuelled by excess borrowing and when the bubble burst it was all too clear what the real situation was: too much cheap, unsecured credit handed out like sweets.

The problem is that people on the streets of Scotland really engaged with the independence referendum in 2014 but, were it to come round again, may not be so passionate about it: the apathy seems.to have returned, or perhaps the realisation that the referenda of 2014 and 2016 have been divisive and people just want leadership, not constant uncertainty.

Sadly, the SNP is hell-bent on its ‘mandate’ for independence, whereas it should rather focus on getting those living in Scotland a better or at least not worse future.

Nah, the Tories know that Scotland for them is of little consequence, from a political party perspective that is, it’s all about self preservation, which is fair enough, that’s what party politics is about.

Often being statesmanlike can be very negative for political party, there is a hint of such an approach from the current FM, (Philip Hammond) he is suggesting that taxes including VAT (sales tax) need to be increased, he is aware of the troubled waters ahead, a little sign just given yesterday with negative Retail Sales.

Hammond is well aware that the current euphoria on UK economy is being driven by consumer spending, signs that may come to an end ( beats me how tax increases will solve anything), so the suggestion from a particular Tory paper is that the Tory manifesto will tell it like it is, in the interest of the country.

Hmmm… bet that will get watered down, no votes in being a statesman.

Pipme, last time the Scots were told that should they choose independence then a horrible thing would happen, they would be outside the EU having to ask to get in, seems that a majority of them figure their future is better in, whether as an independent country remains to be seen.

[I]Bank of America Merrill Lynch FX Strategy Research believes that the UK buys more time by holding the early elections which in turn is GBP positive.[/I]

(they were reading the thread)

The quote is per EfxNews yesterday.

It looks like a Macron vs Le Pen run off in two weeks time, with Macron in front (not a final result, mere estimates only).

If the estimates are proved correct, and likely they are, then no Euro shock for Monday open. Probably no massive moves until the final round but Euro should hold, ‘steady as she goes’.

Update: - Macron still on track, for those outside of EU, he would be the youngest head of state since Napoleon, described as ‘centrist’, pro EU, former banker and FM.

Big change for La Belle France so far.

Le Grande Nation.

Grandeur de la France.

Summit of the 27 leaders in Brussels this Sat.

There’s been a hardening on the 27 side, not sure the reason(s) but either what is being said on the UK side not published or the calling of the snap election after the UK PM stating multiple times that this would not happen - maybe now a lack of trust.

Anyway, whatever the cause the lines have shifted.

Some details have been leaked, likely public after the summit.

I expect some GBP volatility on both Friday on the GDP release and on Monday on the divorce news.