The Day So Far
Love him or loathe him but this morning has seen the return of Tony Blair to mainstream politics. Although the former Labour leader has been busy behind the scenes with his new institute for centre-ground politics it certainly comes at a very interesting time both economically as well as politically for the UK. Firstly, the second reading of the Article 50 bill in the House of Lords is scheduled to take place next Monday and Tuesday. Now let’s get one thing straight in that I see an extremely low risk associated with any type of delay. Thereafter we have Philip Hammond delivering his first budget on the 8th of March, with the European Council meeting in Brussels on the 10th, followed by the celebration of the 60th anniversary of the Treaty of Rome on the 25th. As such, I would imagine somewhere around the 15th of March looks the most opportune for Theresa May to push the button without causing to much backlash over European events, this would also give her the cover of the Dutch election which if anything only strengthens her case for Brexit given the Dutch are likely to vote in a far-right party in the form Geert Wilders of the PVV.
Now moving over to the economic argument and here is where the basis of my view comes as to why Tony Blair has elevated his anti-Brexit calls. UK inflation this week printed at its highest level since June 2014 and the Bank of England recently projected that inflation should peak at 2.8% by year-end. Fast forward to today and we have just seen UK retail sales fall for the third month in a row for the first time since 2000, with the December reading revised down to -2.1%, the third biggest fall in 21 years. For me this is a sign of things to come and as inflation creeps higher in the coming months, in the context of an uncertain political future, households will be the main casualty. For me Theresa May had no other choice when she issued her “hard Brexit” call to arms at the October Conservative Party conference and as we progress through the year I strongly feel that as consumers feel the pinch of rising prices and we see the inevitable slowdown in the economy the very people who voted to the Leave the European Union will soon be asking the question of the government as to what cost. This is where I see Blair stepping into the fold in that he offers a more centrist view in a world that has seen a widening of the political spectrum with the likes of Trump in the White House compared to Jeremy Corbyn leading the main opposition party in the UK. To me this is almost a necessary adjustment in the natural cycle of politics and philosophy in that we almost need to go as far-right as possible in order to find a new balance in the wake of any serious opposition. For me the left need to get over the blame again and start to come up with a viable alternative rather than dwelling on what has occurred. This is where I see a clear window of opportunity for not Blair but at least someone of his ilk to step to the forefront and put the differences of party politics aside for the benefit of the country – a political spirit that I think will become more and more prevalent as we progress through 2017… Don’t worry that’s my political rant over and you be receiving my Party’s manifesto in the coming weeks!
The Day Ahead
Back to the US session ahead and one distinct difference is that the schedule is much lighter and as such we may not get the sparks of activity that have dominated the previous three days. In essence we adopt the same view as the last two days in that US equities remain robust despite the brief wavering of sentiment at yesterday’s open, and as such we continue to position for a short in T-notes and EUR/USD.