Get ready, a perfect storm is brewing.

Trade Wars, Currency Wars, Political Wars - wow what a time to be trading.

Get ready, a perfect storm is brewing.

As I have said many times October 2018 was going to be a big month but it looks like it might be bigger than I thought. Trump isn’t getting his way as China actually has exported more to the U.S than before. Everyone is concerned about their respective currencies and now Angela Merkel in Germany could be in trouble.

Brexit ( source Bloomberg)
It looks like the U.K. and the European Union are simply not going to agree on a Brexit deal this week as this weekends talks ended up getting nowhere. There are no talks scheduled until Wednesday where in Brussels they were hoping to settle the divorce. Both sides have given up on a breakthrough this week, and are increasingly concerned that time is running out to get an agreement before the U.K.’s exit in March.

The weekend was meant to be a chance to crack the Irish border so that the officials could meet Wednesday with some progress at least giving the signal that a final deal could be signed in mid-November.

Opening today both the Pound and The Euro “gapped” and as I have been saying for weeks now there is no deal done yet so why are people buying these currencies off it. There might be a deal and probably will but how good will it be. This is not good for anyone – I am not buying the Pound or the Euro.

The major sticking point remains how to avoid the need for a hard customs border at the land frontier between Northern Ireland and the Republic of Ireland after Brexit. One proposal is to keep the U.K. inside the EU’s customs union on a temporary basis, which would mean no new checks on goods passing from Northern Ireland to Ireland would be needed.

But pro-Brexit ministers in May’s Tory party are determined to make sure any such arrangement has a strict end date, to avoid Britain being trapped inside EU rules and tariffs indefinitely. They want the U.K. to be free to strike trade deals around the world, something that is impossible for countries in the EU customs union.

Despite the pessimism, some observers believe a showdown moment may simply be a necessary piece of theatrics that will act as a precursor to a deal. The September EU summit in Salzburg ended in a diplomatic disaster for Prime Minister Theresa May, yet she used the occasion to her advantage. A breakdown in relations in October could potentially help the premier at home by showing she had stood her ground.

Some EU diplomats speculate that she needs to have a fight in order to get the deal she does eventually deliver through a divided British Parliament. May is probably going to have to count on opposition votes, and will need to present it as the only viable alternative to chaos.

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Get ready, a perfect storm is brewing.

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Categories: Guest Writers, News
Tags: Brexit

About Author

Clive Arneil

Clive Arneil worked for major brokers for over 20 years trading most instruments in the Foreign Exchange markets as well as Derivatives. Brokered deals on behalf of some of the worlds largest banks including Barclays, Citibank, UBS, Nat West and the Bank of England. Worked mainly in the UK but also in Switzerland, Germany and the U.S. Retired from the Money Market at the age of 40 and worked as a financial data feed specialist supplying market data to Banks, Brokers and Spread-Betting companies. Still trading and teaching people the skills required to master today’s volatile markets.