Deal or no-deal Brexit? That is the question

Sep 5 • Morning Roll Call • 1232 Views • Comments Off on Deal or no-deal Brexit? That is the question

On Tuesday, Reuters had published its poll conducted from August 29th to September 3rd on whether Grate Britain will leave the European Union in March 2019 with or without the deal. According to the results, the chances that the UK will leave without a deal are one in four. It is also to believe that the BoE will wait until after Brexit to rise the borrowing costs. In addition, Prime Minister Theresa May is still struggling with the divisions within her own ruling party. According to Howard Archer from EY ITEM Club, the chances that Britain will leave the European Union has risen and hopes of organized and systematical Brexit is seen as less possible. However, with the impression that a deal will be reached the possibility of recession remains distant, even though it is still not clear how Britain will trade after the Brexit due to the escalation of trade war, which is showing signs even now of a world economic slowdown.

On Monday we have seen August manufacturing rates that were lowest in 2 years, as well as construction activity slowing down in the previous month as the business survey showed on Tuesday. The construction purchasing managers index fell to 52.9, as opposed to the expected reading of 54.9. Nevertheless, according to the Reuters poll, it is expected that the Bank of England will raise its rate soon after March by adding 25 points and taking the rate to 1%. Furthermore, reaching 1.5% Bank rate is expected to be reached in 2020, which would give more policy flexibility to the Bank of England.

Yesterday among the important macro-economic news was the RBA rate statement, where the Reserve Bank of Australia had decided to keep the rates on all-time low of 1.50%, entering a 3rd year of policy stability. According to Governor Philip Lowe, it is estimated that the economy has grown at an above trend rate in the 1st half of the year and the business conditions are seen as positive. Another important release came from the US where the manufacturing sector showed an unexpected growth in the previous month, reaching the highest level since May 2004. The manufacturing PMI readings came at 61.3, whereas the forecast was 57.6, signaling a strong demand. However, the economists are still worried about how the reciprocal tariffs are going to impact company revenue and the current manufacturing locations according to the statement given by the chairman of the ISM business survey committee, Timothy Fiore.


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