Posted on July 8, 2016
Story of the Day: Pound loses as markets soar
As the pound sterling wrapped up its third week of decline, currently trading below $1.30, it is officially 2016’s worst performer among major currencies even beating the Argentine Peso so far.’ Deutsche Bank predicts the pound to bottom out at $1.15. This also comes as consumer confidence and spending measures, which are evaluated by the Bank of England vis-‘-vis interest rates, reach their lowest levels in 21 years. Consumer spending is starting to fall as general confidence in the economy begins to quickly decline as the realities of Brexit become clearer.
On a brighter note, the FTSE 100 surged as very positive US job data was released, erasing all Brexit losses and elevating the index to its highest level in 11 months. The FTSE 250 was also up over 1.75 per cent today.
A new IMF report released today indicated Brexit will slow Eurozone growth for the next three years. New estimates project next year’s growth at 1.4 per cent. Meanwhile, European shares are on track for their worst week in 5 months.
With foreign direct investment having all but dried up, George Osborne, Chancellor of the Exchequer, is planning to cut corporate taxes from 20 per cent to 15 per cent. If carried out, the UK would have the lowest corporate tax rate of any major economy, lining up closer to the Irish who are at around 12 per cent.
Generally, there is an increasing sense among people of having been let down by the politicians. At a time when leadership has been needed most, both sides of the campaign have not fulfilled their mandates. The Tories have focussed on electing a leader even though there is a country to run while Labour’s confusion has helped them ignore their responsibility to put forward an effective opposition.
Following yesterday’s leadership election results, Theresa May and Andrea Leadsom are set to launch their respective UK-wide campaigns for both party and national leadership. Theresa May remains the party favourite as she gained three quarters of Tory MPs’ support in yesterday’s vote. Early polling indicates May will experience more of the same among conservative party members by fostering nearly 65 per cent support. Interestingly, Leave.EU, who earlier this week was reported to be harassing Tory MPs in Leadsom’s favour, has released survey results indicating that Leadsom is favoured among grassroots supporters with 56 per cent support.
Thus far, a massively contentious issue remains around the status of EU nationals within the UK. Leadsom has been vocal about reassuring EU nationals that they are welcome to remain within the UK. Meanwhile, Theresa May has intentionally alluded to their future in the UK being uncertain. This behaviour can be seen as posturing against Brussels in support of UK nationals resident in Europe, particularly in regard to their ban on any discussions prior to the triggering of Article 50. However, May knows she cannot eject up to three million people (five per cent of the UK’s population).
The Tories know there is pressure to elect a leader and fill the political void. Voices, including former Chairman Grant Shapps, have called for the PM to be appointed by end of July. Increasingly, the idea of MPs drifting off when Parliament recesses at the end of the month to Tuscany and coming back refreshed in September to appoint a new PM is seen as irresponsible by critics.
For once there is very little drama to report on today in the Labour Party. Radio silence may become the trend until those Labour MPs who oppose Corbyn concoct a new strategy on how to deal with their current failing situation. Meanwhile, Corbyn is off to France for to speak at a socialist convention.
A Labour MP today initiated a campaign called ‘Vote Leave Watch’. The organization aims to hold accountable the ‘wild promises’ of the Vote Leave camp during the referendum. In their view, the most notorious claim was re-allocation of the ﾣ350 million a week that the UK sends to Brussels being diverted to the National Health Service. Vote Leave now admits that figure is more likely to be in the range of ﾣ128 million.
Against predictions, which of course in the last two weeks have proved futile, polls across Europe have showed a firming up of support for the EU. Surprisingly, Austria, Germany, Finland, Denmark and the Netherlands have seen popular support for right-wing Eurosceptics fall. In fact, pro-EU German Chancellor Angela Merkel has seen her popular support rise to a 10 month high. This sentiment will embolden the European Commission, but of course, a more accurate representation of how Europeans feel will come from the nature of the deal the UK finally gets. There are many, many more uncertainties on the horizon.
And finally good luck to the UK and to Canada as we meet Sunday in the Wimbledon men’s final.
Five Must-Read Articles
- Brexit: George Osborne pledges to cut corporation tax (BBC News)
- First legal attempt to prevent Brexit set for preliminary hearing (The Guardian)
- Peter Jones: “If I was in charge of this government I’d have sacked them all” (The Telegraph)
- Jeremy Corbyn stands defiant after Labour membership surge (The Guardian)
- Obama to huddle with European Union leaders over Brexit (The Associated Press)
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