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Racing to the bottom

| Posted by: Paul Donovan | Tags: Paul Donovan

  • UK Prime Minister May's Tuesday speech has been preceded (as is traditional) by "informed" press comment. The policy seems to have shifted to "Brexit really means Brexit" with suggestions that the UK will exit both the EU single market and the customs union – although there may be a corporate tax "race to the bottom".
  • In a press interview, US President-elect Trump signaled that he supported the UK's move to exit the EU, that he did not care if the EU broke up, and that he thought other countries would leave. Most countries have seen an increase in support for the EU since the UK's exit decision.
  • The key point from Trump's interview is that (in inauguration week) the tone remains basically that of candidate Trump. Market expectations for a metamorphosis, with President Trump having different polices and processes from candidate Trump, are not yet in evidence.
  • In the absence of US data, there are a few items in the European time zone. There are a couple of ECB speakers, and final Italian consumer price inflation. This is not going to excite markets, and today's newsflow probably remains in the hands of politicians.