Morning Commentary: “Keep Calm and Carry On”

Foreign Exchange - Morning Commentary

“Keep Calm and Carry On”

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Alan Rose
Alan Rose
Foreign Exchange Head Trader
The stereotype of the British people is that they keep a stiffer upper lip, persevere through the most difficult of times and maintain their poise, dignity and self-control. PM Theresa May is doing her best to mirror those qualities through the most difficult of times as an internecine warfare and party rebellions are breaking out within her Tory party.
What is happening in the U.K. is no different than what happens here during heightened political times as political posturing, bravado, and bluster allow politicians to stake out the easy ground before having to make a difficult decision that weighs upon the national interest above local politics. This is not to say that PM May will get the votes she needs from her cabinet, the Tory party and Parliament to withstand a challenge and a potential vote of no confidence, but she is maintaining her poise, carrying on and not succumbing to the calls of stepping down.
Overnight, two cabinet members have decided not to resign and the markets are reacting in a positive manner for now.  U.K. interest rates have clawed their way to higher levels after the emotionally charged overreaction yesterday and the British pound has stabilized and is back in the middle of yesterday's volatile and frantic range. There is much at stake for the U.K. economy regarding the continued tenure of PM May and the outcome of the Brexit negotiations – continue to expect volatile times ahead.
Factoid: despite all the political and economic uncertainty surrounding Brexit and the ultimate state of the U.K. economy, Boeing just opened up its first European factory in the U.K. last month. It is most interesting to note that they could have set up anywhere in Europe but chose the U.K. during these uncertain times.
  • U.S. Industrial production for October was slightly weaker than consensus rising by only 0.1% with a downward revision to September from 0.3% to 0.2%. U.S. interest rates are opening lower again today (10-year rates are down for the fifth straight day) causing the U.S .dollar to weaken.
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