The World In A Week – Interminable tedium
The title ‘World in a Week’ is a clear reference to Brexit. Last week, Prime Minister May, on her third attempt to push through a deal, failed, again. This time, on a technicality brought by speaker of the House of Commons, John Bercow, who actioned a ruling from 1604, which prevented government from bringing back the Withdrawal Agreement for a vote, as no meaningful changes had been made. Prime Minister May had little time to lick her wounds and quickly petitioned the European Council for an extension to the Brexit deadline, which was granted, unconditionally, to 12th April. The deadline will be extended to the 22nd May if a deal is passed beforehand. May will now face a long extension or, a no-deal Brexit and akin to a dreadful soap opera, we must watch the next episode.
Whilst in the US, the Federal Reserve met to decide if they should increase interest rates. The US equity market has performed strongly in 2019, which signals economic strength however, GDP data confirmed that growth was in fact weaker than expected at 2.1%; below the 2.3% which was forecast. This downgrade in expectations meant that the US central bank did not increase rates and indicated that they were unlikely to increase interest rates for the remainder of 2019. US equity markets rallied initially as easier monetary policy is usually positive for stock prices; although subsequently, markets fell, as investors became increasingly wary of the Federal Reserve’s cautious economic predictions.
Back in the UK, the Bank of England met, also to discuss increasing interest rates. The Monetary Policy Committee, unsurprisingly, given the backdrop of the Brexit impasse, unanimously voted to keep rates unchanged at 0.75%. Despite the stifling effect that Brexit appears to have had on the UK economy, economic growth has been stronger than expected in the last few months, unemployment is at the lowest since the mid-1970’s and wage growth accelerating at the fastest pace in a decade – a shining beacon of hope perhaps?
The week ahead is likely to be consumed with the ongoing Brexit saga; which means the UK equity market and Sterling could experience marked volatility. What remains to be seen is if May will be a leading lady in further negotiations or, if her role will shrink to that of bit part.