Britain will Not Reveal Details of its Brexit Strategy
What is Britain’s Exit Strategy with the EU?
On Monday, 12 September 2016, the GBP/USD pair rallied by 0.4869%, gaining $0.0065 to trade at 1.3340. The resurgent GBP is a slap in the face to fear mongers who were calling for the U.K.’s economic collapse post-Brexit. The 52-week trading range of the GBP/USD pair is 1.28 on the low end and 1.57 on the high end. There are several factors working in the sterling’s favour, notably strong economic data releases including year on year GDP growth of 2.20% and quarter on quarter growth of 0.6%. The UK interest-rate is currently 0.25% and the inflation rate is at 0.60%. The UK shares the same unemployment rate as the United States at 4.90% and the government debt to GDP ratio is at 89.20%, significantly lower than the US equivalent of 104.17%.
Further, manufacturing PMI data in the UK is currently at 53.3, up substantially from 48.3. Services PMI is also higher at 52.9, up from the previous figure of 47.4. Consumer confidence is at -7, down from -12 in the previous reading. Retail sales growth, month on month, has increased by 1.4%, compared to the -0.9% previously. The year-on-year retail sales growth in the U.K.is at 5.9%, up from 4.3% in the prior reading. All of this data points to a resurgent UK economic performance. Personal savings are up by 5.9%, versus 3.8% previously and housing starts are higher at 39,910 versus 35,390. The housing index however is down to 692 index points from 694 in the previous reading.
What Details Does the Brexit Minister Wish to Keep Private?
David Davis stressed that details of the U.K.’s exit strategy from the EU would only be made public once Prime Minister Theresa May has invoked Article 50 of the Lisbon Treaty. Further, he made it clear that it was not in the ‘national interest’ to reveal all aspects of Britain’s Brexit strategy. There will be a great degree of back-and-forth going on until the Prime Minister decides to pull the trigger and officially begin the disentanglement process.
British negotiators will require maximum leverage when it comes to exiting the EU, and for this reason specifics will have to do be kept on the down low. Davis stressed that Parliament would be apprised of relevant data, but not all the fine details. The goal is to optimize the outcome for the UK, and this can only be achieved by keeping bargaining chips available to UK negotiators as part of the deal.
Sellers Reluctant to Sell with GBP Weakness
Meanwhile the Brexit saga has played havoc on the UK property market. While the FTSE 100 index has rallied, there are various sectors that have yet to regain their footing. These include the consumer discretionary sector, telecom providers and real estate. It was the Bank of England’s rapid-fire series of policy decisions that likely countered many ill effects of the Brexit. The massive quantitative easing policy with government and corporate bond purchases as well as the 25-basis point rate cut helped to ease pressures on the UK economy and drive economic activity.
Today, the FTSE 100 index is approximately 7% higher than it was at the close of trading on Thursday, June 23, 2016. Likewise, the FTSE 250 index (largely UK-based companies) is also up some 3.4%. The big concerns for the UK economy, as evidenced by spread betting activity is housing and discretionary spending. The property sector continues to drag the UK economy lower, and the Brexit factor is just one issue responsible for this. Housing prices are also rising and sellers are not interested in letting go of the real estate at this point in time.
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About Brett Chatz
Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. Nowadays Brett contributes from his vast expertise in online trading for spreadbettingreview.co.uk.