A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
And Then There Were Two
Share this story:
Andrew Kositkun Foreign Exchange Head Trader
After multiple rounds of voting, the UK has narrowed its list of potential Prime Minister candidates down to two people—Boris Johnson and Jeremy Hunt.
With the parliamentary stage of the leadership contest over (MPs vote), the voting now turns to the greater Conservative Party which will vote at 16 formal hustings, or meetings, where candidates address voters.
Currently Boris Johnson, who is seen as the more pro-Brexit of the two, would appear to be the favorite to win as the majority of the Conservative party members favor a no deal exit. Given this, history has shown frontrunners tend to return to the pack, leaving this election to be anything but a straightforward proposition.
In terms of stance, both candidates share the same main goal, which is to get the UK out of the EU. However, Jeremy Hunt faces an uphill battle to prove his resolve on this issue as he originally campaigned for the UK to remain in the EU during the 2016 referendum.
On balance, Hunt appears to be the more pragmatic of the two and expressed a willingness to consider a third delay should it increase the possibility of a better deal. This where the two candidates have the biggest difference in stance.
Whoever is the next PM (announcement expected the week of July 22) will be facing a truncated timetable to get Brexit squared away before the October 31st deadline. Absent another extension, the EU Council meeting on October 17-18 will be the last chance renegotiation.
Ultimately, we are three years into Brexit and still at square one. The new PM will likely attempt to renegotiate PM May’s deal but the reality remains that all options—including a second referendum or an election—remain on the table. To this end, the implied probability of an election in 2019 has risen to 38%, the highest level since early April.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
Markets continue to focus on the G20 meeting this week with particular focus on the “extended” meeting expected between Presidents Trump and Xi at the end of the week. Last Friday, Vice President Pence called off his speech on China with an anonymous White House official stating there was “room for progress” and concerns over stepping on “that potential.”
Fed Chair Powell is expected to speak tomorrow and markets will be watching for further guidance on the Fed’s rate path.
The AUD has risen for the 5th consecutive session as RBA Governor Lowe flagged the limits of monetary policy.
Oil is higher on the session as the US is expected to announce new sanctions on Iran as soon as today.
The Turkish lira jumped as high as 1.8% against the USD as the candidate supported by President Erdogan’s party for mayor of Istanbul was resoundingly defeated.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Tune in for a guide to ETFs and investing strategies for potential long-term success. View in a browser Fidelity Fidelity Log in Creating a portfolio with ETFs: Why and how Creating a portfolio with ETFs: Why and how
Exclusive webinar: The market, my portfolio, and options. Exclusive webinar: The market, my portfolio, and options. View in a browser Fidelity Fidelity Log in The market, my portfolio, and options The market, my portfolio, and options