Trump warns draft Brexit agreement ‘good deal for EU’

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27 November 2018


Sterling lost another half a percent of its value on Tuesday morning, sinking to around its weakest position so far this month, after US President Trump warned that the proposed Brexit deal could hamper the UK’s trade ties with the US.

rump claimed that the current draft agreement was a good deal for the European Union and that it meant that the UK may not be able to trade with the US. Earlier this morning, former defence secretary Michael Fallon also issued words of warning over May’s deal, claiming on BBC radio that the Brexit deal was ‘doomed’ and must be renegotiated.

Theresa May appears to be fighting a losing battle to force the deal through a UK government vote. The Prime Minister will require 320 votes out of the 650 seats in parliament in order to pass the agreement. While she should have a slightly easier time convincing members of her Tory Party to back the deal, she needs support from members of the Labour Party, particularly given her coalition ally, the DUP, appear almost certain to vote against it.

Parliament is set to vote on the deal on 11th December. This date now presents itself as a critical junction in the entire Brexit process. May has repeatedly warned that MPs are faced with the choice between her deal, and no deal altogether.

US Dollar strengthens, Draghi strikes cautious tone

Additional comments from Trump on US-China trade also supported the US Dollar on Tuesday, allowing the greenback to rally to its strongest position in almost two weeks against the Euro.

The US President stated that he would follow through with his plans to impose a 25% tariffs on $200bn worth of Chinese goods, while threatening a further 10% tariff on imported iPhones and laptops. This doesn’t bode especially well for the G20 meeting later this week, in which Trump and Chinese President Xi Jinping are expected to discuss trade. Any meaningful progress during the negotiations now appears unlikely.

On Monday, we also had some fairly cautious comments from ECB President Mario Draghi that further weighed on the common currency. Draghi stated that recent data was weaker-than-expected. He said that the bank was on course to end its QE programme as scheduled in December, although his use of words ‘at current time’ suggest that there is a chance the central bank reverses course at its December meeting and extends its asset purchases. We do, however, think that this is very unlikely, baring a significant financial market event.