Jan 17, 2017 - Here we go, the Brexit...

Theresa May (UK) to speak at 1145 GMT (unconfirmed).

Very likely the UK is heading toward the full (hard) Brexit and is willing to renegotiate the relationship with EU from the beginning. We believe that nobody should be surprised by the news anymore as many rumours already made the headlines. The hard Brexit in other words means to have a very limited trade relationship with EU (legally) that may be for certain period of time governed by WTO rules only.

We do not want to speculate on what kind of agreement can UK hammer in the future or what the negotiations will look like as lots is in stake on both sides. Just for example: London based banks losing the EU passport, UK based companies losing access to single market, British travelers to EU queuing in the lines together with Africans, Americas and Asians at the EU airports, German car makers and French food producers not enjoying the duties and tariffs, Spanish not very happy about the decline of UK retirees living and buying properties by the sea or tougher rules for EU citizens who want to work in UK and vice versa.

What was not that much in the news is a geopolitical perspective. The Anglophone block is being created by UK, US, Canada and Australia as Trump is open to build the closer ties with UK and Canadians court British for the same. On the other hand, the German voice will be the loudest in Europe and their business partnership with Russians will create another block (in case of Socialists winning elections this year). China and its global ambitions can not be underestimated anymore and here we go, we have ended up with three geopolitical power blocks.

Read more: Why Trump, Putin and Erdogan are good for Europe? and Why Angela Merkel will win German elections in 2017 and become the Chancellor for the fourth time?

Meanwhile Mark Carney (BoE) mentioned that he is not comfortable with consumer lead growth as it tends not to last very long. From our view the inflation will keep moving higher and it will depend on the BoE tolerance how far the prices can rise above 2% level before BoE hikes the rates. Very crucial will be the response of households to inflation during the negotiation and after the exit.

Let's wait what she has got for us and watch the market reaction.

Good luck Champs!

Mr Hawk

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