Brexit: A 4-Year Check-In
Join us as we wind the Contentworks time machine back 8 years — it’s 23 June 2016, and the UK population is about to make a decision that will drastically impact the regional and global economy. Was it the right decision? Well, flux capacitor on as we assess how Brexit is going, 4 years after the “official” split. After that, we’ll preview the top fundamental events you can trade this week.
Wait, I need a refresher…
In 2016, the British public voted to leave the European Union, with 52% voting out. The move shocked the world and instantly panicked markets, businesses and consumers alike.
After a lengthy negotiation process, four years later the UK officially departed the EU on January 31st, 2020.
Today, we’re going to examine the tangible effects of Brexit on the British economy, currency, trade, and — of course — people’s wallets. Then we’ll see what’s coming next.
Pound for pound — how is GBP doing?
Quite astoundingly, the GBP seems to be relatively strong against the dollar. Certainly when compared to the euro, the quid is holding its own.
🔵GBP/USD
🟡EUR/USD
Source: Google
The EUR currently sits -4.75% vs. USD, with GBP -2.75%. It’s hardly cause for celebration, but the fact that, over the past 5 years, the pound only briefly fell out of correlation with the euro and that was when the split first happened. This could easily be counted as a relative success — if you’re a glass-half-full kinda gal/guy.
Even better, there are increasing signs that the pound is set to embark on an upward trend. Rapid fall in UK inflation since its peak in 2022 has propelled the GBP forward. There’s an expectation that, as soon as macroeconomic effects improve, the GBP will thrive. If it comes, the question is: how long will it last?
Don’t shout about that too loudly though, yeah?
Trade disruption
Non-tariff barriers (NTBs) caused massive delays at ports in the early days of Brexit. Fundamentally, no one knew what on earth to do and how to get things moving again.
There were increased administrative requirements for businesses, disrupted supply chains and don’t even mention how badly that impacted consumers. To date, the UK has signed trade deals and agreements in principle with about 70 countries and, importantly, one with the EU.
Most of these deals are essentially just carbon copies of deals the UK previously had when it was an EU member, rather than creating new trading arrangements, but that’s not necessarily a bad thing. For example, the UK no longer has to follow EU rules on product standards.
Economic growth
Remember that inflation drop we talked about? That’s really good news for people’s back pockets. The last few years have not been plain sailing for the UK public who have experienced the longest period of falling living standards since the Napoleonic wars! Yeah, that was over 200 years ago!
Because of the tightness of the labour market, average wage growth is probably going to remain well above inflation levels over the coming two years. That means a lot more money sloshing around in people’s bank accounts and if people do what they tend to do when they suddenly have some spare change for the first time in a while, they will look to spend it — which is great for the economy.
What’s next?
The mood between London and Brussels has definitely become more amicable since 2022, though core issues remain unresolved.
One biggie is that post-Brexit tensions have continued in Scotland where a majority voted to remain in the EU. That whole Scottish independence situation still needs sorting out, though the SNP have conveniently, and involuntarily, all but removed themselves from the situation.
Another imminent update is actually happening tomorrow (April 30) — when the second phase of Britain’s border controls on food imports from the EU kicks off. This will introduce physical checks for ”medium risk” animal products, plants and plant products, things like frozen meat, fish, cheese, eggs, dairy products and certain cut flowers and seeds. Let’s see how that goes…
With a good chance that the UK will have a new (Labour-led) government in January 2025, there’s optimism that such change may bring an opportunity to negotiate.
Who knows, the future of the UK might well be back in the EU. John Curtice, a prominent professor of politics at the University of Strathclyde and a well-respected pollster in Westminster recently stated that he “wouldn’t be surprised if (another referendum) happens before 2040.”
We’ll leave it there…
What’s your opinion?
If you voted in the referendum in 2016, are you happy with how it played out? Has Brexit been a success in your eyes? Join the debate over on X at @_contentworks.
Top fundamental events week commencing 29/04/24
We hope you had a quiet weekend because this week is going to feel like a year! Ready?
Monday
● EUR — German Inflation Rate YoY Prel
Tuesday
● CNY — Chinese NBS Manufacturing PMI; Chinese Caixin Manufacturing PMI
● EUR — French GDP Growth Rate YoY Prel; French Inflation Rate YoY Prel; German GDP Growth Rate YoY Flash; Inflation Rate YoY Flash;
● USD — Employment Cost — Wages QoQ; Employment Cost Index QoQ; CB Consumer Confidence
Wednesday
● USD — ADP National Employment Report; Treasury Refunding Announcement; ISM Manufacturing PMI; JOLTs Job Openings; Federal Funds Rate; Fed Press Conference
Thursday
● AUD — Balance of Trade
● JPY — Consumer Confidence
● CAD — Balance of Trade
Friday
● USD — Average Hourly Earnings MoM; Nonfarm Payrolls; Unemployment Rate; ISM Services PMI
Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.
Speak soon!
The Contentworks team
