Fundamental analytics

Turbulence after May

It can be said with confidence that British Prime Minister Theresa May has made every possible effort to solve the Brexit problem. Having announced her resignation, Teresa May actually admitted that she has not seen ways to resolve the problem to protect the interests of Great Britain due to the split in the political conservative party. The Prime Minister was caught between the hammer and the anvil. From the outside, she was attacked by the European Union, forcing her to look for more and more compromises, and from within, her efforts were undermined by party colleagues. The Conservative Party of Great Britain split and instead of supporting Theresa May, got a serious internal party conflict.

 

May could not have much flexibility in making decisions precisely due to the pressure from hard-for-Brexit supporters, who agreed to tighten the UK’s migration policy and sacrifice freedom of movement “without borders” within the Union, but insisted on retaining some of the economic advantages of staying in the EU. This position is actively promoted by the popular candidate for the post of Theresa May, the former foreign minister, Boris Johnson.

Among British politicians and journalists there is an opinion that if Boris Johnson takes the post of party leader, this would mean the coming to power of the “British Trump”.

 

The tough position on the issue of leaving Britain from the EU will definitely have a negative impact on both the GBP rate and the EUR value. Which currency will suffer the most? It is impossible to say unequivocally, but the USD has already shown growth over both currencies during past 4 months, ahead of events. The EU Central Bank will not be able to effectively manage economic processes and this may lead to a recession in Europe.

If the FOREX market tries to take into account the future events, then the stock and bond markets, usually, respond to current news.

Against the background of general political uncertainty, the global stock markets feel huge pressure of a prolonged trade conflict between the US and China. Any negative piece of information about the tough Brexit will mean another step back in resolving the problem of the global economic slowdown. Probably, this could be the beginning of a new stage of the global economic crisis.

Currently, the US dollar is in demand as a reserve currency and clearly benefits from problems in the EU, however, with investors become more and more aware of coming global economic crisis, not a single currency can compete with gold!

 

Thus, as uncertainty grows and negative news dominates, gold has every chance of setting new historical price highs.

 

It is possible that as a result of the election, more “soft" candidates, such as Foreign Minister Jeremy Hunt or leader of the majority in the House of Commons Andrea Leds, can win in the UK. And yet, there is no guarantee that they will be able to withstand the pressure of the radical part of the parliament and the UK society. As a result, whether future UK leaders will be able to soften Brexit remains a big question, but one can definitely say now - a smooth exit will not happen for sure. Investors should be prepared for high turbulence on financial markets.

 

 

New articles