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Theresa May to ask the EU for a second post-Brexit transition period

Published: Thursday 24 May 2018

  • White House to consider tariffs on US auto imports
  • Canadian Dollar suffers after dovish Federal Reserve minutes
​​By Jonathan Russel

Sterling edged up amid reports that UK Prime Minister Theresa May will ask the EU for a second post-Brexit transition period to run until 2023, maintaining the status quo on customs and thus avoiding disruption of commercial activity. The Prime Minister’s proposal has not yet been tabled in Brussels and faces opposition from EU negotiators and Brexit-supporting Conservatives. The transitional deal already agreed will last from next March to the end of 2020.

The US Dollar lost some ground after the release of the minutes from the recent meeting of the Federal Reserve stopped short of boosting rate hike bets beyond 2018. Trade war jitters unnerved investors after the White House launched a probe into auto imports, previously the administration has used the findings to justify sharp hikes in aluminium and steel tariffs. President Trump has stated that auto workers will “be very happy with the outcome”.

The Canadian Dollar suffered on the back of this. Motor vehicles and parts are its top export commodity and the US is by far the largest destination market, accounting for close to 80 percent of cross-border sales. It is hardly surprising then that the prospect of a US tariff on autos weighed on the currency, this might also complicate on-going North America Free Trade Agreement (NAFTA) renegotiation efforts.

Looking ahead a speech from Bank of England Governor Carney will be closely watched particularly after the weaker inflation data yesterday. UK retail sales are also due in an otherwise quiet calendar in European trading hours.

A man goes to the doctor for a check-up.
After the exam, the doctor tells him, “I have some bad news: You only have about two weeks left to live.”
The man is shocked and asks the doctor, “Is there anything I can do to make the time that I have left more tolerable?”
The doctor replies, “There is one thing that you could do.”
“Just name it – I’ll do whatever it is,” the man replies.
The doctor advises the man to take mud baths at least two or three times each day.
The man asks, “Will that help my condition?”
The doctor answers, “No, but it will get you used to the dirt.”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR All Day Eurogroup Meetings    
GBP 09:30 UK: Retail Sales -1.2% 0.8%
EUR 12:30 European Central Bank Monetary Policy Meeting Accounts    
USD 13:30 US: Unemployment Claims 222k 220k
USD 15:00 US: Existing Home Sales 5.60m 5.56m

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