The silence of the impact reports

Brexit minister David Davis, as part of his planning for a ‘no deal’ outcome with Brussels, is to brief the cabinet on the likely impacts of a hard Brexit for 58 separate industries and sectors. The issue for those operating in those sectors is that all briefings and impact reports will be hidden from public view and not released in any form. It’s said that the contingency planning and policymaking would be hindered by carrying out the debate in public view and could undermine their negotiating position with Brussels. Understandably, the opposition has been very critical of the government discussing the outlook for close to 90% of the economy behind closed doors, but we anticipate the details won’t remain unseen for long as the negotiations with Brussels continue to stagnate and linger.

The UK calendar is particularly light today with market focus still on Thursday’s Bank of England rate decision. Jeremy’s holding a webinar on Thursday morning to talk through our thoughts on UK monetary policy and what this could mean for you and your business. Sign up here.

A Hallowe’en witch hunt or something more sinister?

Much of the political ballast that’s been built up by the White House in recent weeks could be lost after Special Counsel Robert Mueller’s probe into alleged ties between Russia and the Trump campaign. The investigation has resulted in former Trump campaign chairman Paul Manafort and campaign official Rick Gates receiving indictments for counts including money laundering, making false statements to federal authorities and, most ominously, conspiracy against the United States.

While the indictments themselves aren’t necessarily surprising (and haven’t budged the dollar significantly), this marks the first step in what could be a much broader and wider-reaching investigation. Trump himself took to Twitter to declare that there has been “NO COLLUSION!” and that the charges relate to actions that predate the Trump campaign by a matter of years. What that says about Trump’s due diligence and background checking is best left unsaid but it’s hard to see this furore coming to a close anytime soon.

Why does this matter for the dollar and foreign exchange markets? The longer these investigations clog up the White House’s timetable, the less time Trump can lobby for his flagship tax reform policies. With as much as $2.6 trillion of corporate profits sitting offshore, dropping the tax rate could incentivise US companies to bring this back home. Such a move would prompt a flurry of dollar buying and, if all the profits were repatriated, bringing this cash onshore would be the equivalent of adding another California (the largest US state economy) onto the national accounts. Reports that corporate tax relief will be on a less aggressive than expected timeline will not have helped matters.

Catalan werewolf in Brussels

After alarming news coverage of the disintegration of political discourse in Catalonia over the past few days and weeks, the crisis appeared to cool yesterday as the Spanish government reclaimed Catalonia’s autonomy and assumed control of all local authorities with little resistance. Puigdemont, the former Catalan President, has fled the region for Belgium under threat of arrest and both secessionist and pro-Madrid parties will now prepare for elections due ahead of the 21st December.

There has been a somewhat critical shift in public opinion over Catalan independence in the past 10 days or so. According to polling, just 34% of Catalans now support secession from Madrid and projections see the pro-independence parties falling short of a parliamentary majority. Spanish bonds and equity markets rallied throughout the day and this appears to have lent some support to the euro, which has pulled back from last week’s lows.

Have a great day.