“The Brexit Letter to the EU and the UK economy…”

Fixing the US Health Care system

On Friday President Donald Trump and Republican legislators failed to achieve majority and the voting for the health care bill was postponed. The reflation trades initiated by Trump’s election have failed in March and investor’s doubts grew about whether Trump will fulfill his pro-business agenda featuring tax cuts and regulatory changes. The dollar, stocks and bond yields declined favouring gold as an alternative amongst investors.

Spain

The inflation rate in Spain weakened in March for the first time in almost a year and consumer-price growth stood at an annual 2.1 percent in March down from 3 percent in February. The rate is much stronger than a year ago, when prices were falling, reflecting a jump in energy costs.

The Brexit Letter to the EU and the UK economy

At 1.20 pm in Brussels, Tim Barrow the UK’s EU envoy handed to EU president Donald Tusk the letter invoking Article 50 of the Lisbon Treaty, the legal mechanism to exit the bloc. Britian is awaiting either a “hard Brexit” where Theresa May could walk away with no deal or a “soft Brexit” with continued “tariff-free trade”. The upcoming talks shall test the negotiation power of Theresa May who has just been in power for eight months and who had voted to stay in the bloc. Donald Tusk said that discussions on future commercial ties will only take place until sufficient progress was made on the term of Britain’s withdrawal from the EU. Since the referendum the pound has weakened by 17% leaving a positive result on the UK economy in the fourth quarter of 2016, however, signs on consumers from inflation have started to emerge. Trade was a contributor for the increase in Gross Domestic Product with the latter increasing by 0.7 percent which is the fastest pace in a year. Since 2011, the current account deficit showed a record improvement narrowing to 2.4 percent of GDP. These improvements reflect a narrowing trade deficit as the drop in the pound boosted exports. Consumers are however being hit from rising food and fuel prices. This burden on consumers is evident from the latest figures from the Office for National Statistics. Consumer spending slowed to a growth rate of 0.7 percent, which is the weakest in almost a year. Household disposable income adjusted for inflation also declined by 0.4 percent, which is the highest decline since early 2014. The saving ratio has gone down to a record-low of 3.3 percent from a 5.3 percent in the third Quarter 2016.

What is expected the week ending 7th April

• Fed minutes from the March meeting
• China President Xi Jinping to meet US President Donald Trump
• US Non-farm payrolls are due on Friday

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