UK: Brexit at the centre stage - Westpac

Tim Riddell, Research Analyst at Westpac, explains that May’s Brexit Cabinet is thrashing out its stance in front of critical Brexit summits and negotiations in March.

Key Quotes

“How this is received domestically as well as by EU-27 is critical given the vulnerability of May’s minority Govt. UK’s chief negotiator Davis outlined a more EU (also GBP) friendly stance on regulation, but this could trigger more Party schisms and even a leadership challenge. GBP is therefore likely to be balancing finely between a potentially positive Brexit stance and domestic political rifts.”

“A disappointing rebound in Jan retail sales highlighted the constraints on household finances. Although the latest labour report saw a minor lift in average earnings, real income growth remains negative and the ONS hinted that their data suggest that unemployment may have based.”

“The more hawkish tone of BoE members on the back of a solid economy may mean that “May is in play”, but their path is notably gradual and, in the interim, GBP rebounds should be capped by Brexit risks whilst vulnerable household finance may impact both service and retail sectors.”