Theresa May embarked on a whistle-stop tour across Europe yesterday in a bid to obtain support for concessions on the Brexit deal. On what proved to be a busy day, the UK prime minister paid visits to The Hague, Berlin and Brussels, although there are some who believe she is wasting her time. The European commission president, Jean-Claude Juncker, reiterated that there is ‘no room whatsoever’ to renegotiate the Brexit deal. Speaking to the European parliament in Strasbourg, Juncker said that “Everybody has to know the withdrawal agreement will not be reopened.”
Later, the German chancellor Angela Merkel told May that the Brexit deal could not be renegotiated. After her meeting with the prime minister, Merkel told the CDU/CSU alliance she had excluded the possibility of reopening Brexit negotiations. However, she added she remained confident that a solution could be found, highlighting the point that the majority of British MPs did not want to leave the EU without a deal.
Sterling movements were fairly muted yesterday, as it moved higher against the dollar in the first part of the day before falling back further. Jamie McGeever of Reuters sent a Tweet yesterday which helps show how Monday was one of the worst days in the past ten years for the pound. The pound crept back above the $1.26 mark against the dollar yesterday, but then fell back towards $1.25 following reports that Sir Graham Brady had received 48 letters required to trigger a vote of no-confidence in May.
This morning, there has been official confirmation that at least 48 letters have been received and a ballot will be held on Wednesday evening. May now needs at least 158 Tory MPs to back her, although she could well resign if she doesn’t get that number, but the figure is still significant. At the time of writing, the pound is actually making some slight gains, as the markets don’t necessarily believe that a leadership challenge is a bad thing. It could even lead to an extension to Article 50.
Around lunchtime, Bloomberg reported that Beijing had taken a step towards cutting tariffs on imported US cars which provided a much-needed boost to the European stock markets. The levy China currently imposes is 40% of the car’s value, so a reduction would boost car-makers. It is worth bearing in mind that the current tariff of 40% was only brought about because of Trump’s tariffs, so it’s not quite the win that Trump will undoubtedly claim.
In the UK, wage growth hit its highest mark for ten years with one important caveat: it is only true if you disregard the impact of inflation. Once you factor that in, wage growth actually drops from 3.3% to 1%. In addition, the growth can perhaps be seen as a sign that companies are struggling to find enough workers, which is certainly going to be a problem for UK businesses in the future.
Still, some 396,000 more jobs have been created in the UK over the past year. On the flipside, the number of people unemployed in the UK increased by 20,000 between August and October. In total, unemployment has increased to 1.38 million from 1.36 million in the previous period. The ZEW economic sentiment index in Germany was much better than expected, although it still came in at -17.5 for December.
It is fairly quiet for the rest of the week on the UK economic data schedule (although Brexit will surely provide enough talking points). Today we will see America’s November’s inflation rate, as well as the eurozone industrial production figures for October.
While waiting to see what will happen re Brexit, you might cheer yourself by reading why your plans to buy abroad won’t be affected even by no deal. At least from a legal point of view – currency is another matter and we would strongly urge you to put strategies in place before Christmas. It could prove to be a very wise move.