LONDON (Reuters) - The British parliament debate on Prime Minister Theresa May’s Brexit bill saw some fine rhetorical flourishes.
Pro-EU Tory MP Ken Clarke, saying he would vote against it, said: “Apparently you follow the rabbit down the hole and you emerge in Wonderland.” But in the absence of a wider Conservative rebellion and with the Labour Party in turmoil, the 137-word bill, which will allow May to trigger Article 50 by her deadline of March 31, should pass easily after its so-called second reading today.
The actual vote is expected about 1900 GMT. Scottish nationalists will however vote against, signalling a tough battle for May on a different front further down the line. And just as Britain embarks on the highly complicated Brexit negotiations, May’ s wooing of U.S. President Donald Trump has upset some European allies. Some fear Britain is undermining EU diplomatic unity and aligning itself too closely with Trump on issues such as Iran and Israel.
Allegations of dodgy finances are playing into the French presidential election bids. Paris police searched the office in parliament of Francois Fill, who had been favourite to win the presidency for conservative party The Republicans until a week ago, amid reports that his Welsh-born wife Penelope drew hundreds of thousands of euros in pay from state funds without doing any work. Party grandees are now considering a ‘Plan B’ without him.
Far-right leader Marine Le Pen has also failed to repay money that the European parliament says she has misspent. It says she used the money to pay an aide at the National Front’s headquarters. She says she this is a politically motivated attack.
Meanwhile in Romania, the government last night introduced what amounts to the country’s biggest retreat on anti-corruption reforms in a decade. Protesters took to the streets immediately. The measures include the decriminalisation of some abuse-of-power cases. Romania is one of Europe’s most corrupt states and its justice system is under special monitoring by the European Commission. So reactions in Brussels will be interesting as well as the action in Bucharest.
The Trump team’s broadside against a strong dollar, however seemingly incompatible with its other planned economic policies, throws another curve ball at existing market assumptions about his presidency.
The dollar swooned in response to Trump’s comments about Chinese and Japanese “devaluation” and after his trade adviser criticized Germany for using a “grossly undervalued” euro to exploit its trade partners.
Even though it wasn’t the biggest one-day dollar drop on record – the DXY index only recorded its second biggest fall of the year so far and only the seventh biggest fall of the past 12 months – the risk of repeated comments like these over the months and years ahead is now a massive hurdle to any dollar gains going forward and a red flag to a marketplace that is still very long of the US currency. It also opens up another fissure in Trump’s relationship with the EU and Germany, which coincidentally chairs this year’s G20.
G20 was supposed to have codified agreements on not seeking trade advantage via currency moves. The latest tack from DC will make for a very interesting finance ministers and central bankers meeting on March 17. From a market perspective, however, talking the dollar down is at odds with Trump’s other policies of fiscal stimulus and narrowing the US trade deficit via border tax adjustments and protectionism. The tension and volatility in that twin track could be alarming. And it’s also at odds with continued Fed rate rises.
The FOMC decides on policy later – no change today, but signals about a possible move in March will be watched very closely given that futures market still only prices in less than a 20 percent chance of hike next month.
What the jump in euro/dollar is arguably consistent with, however, is the latest high frequency economic numbers on Tuesday – showing the euro zone growing faster than the United States at the end last year and headline inflation in the bloc back close to the ECB’s target of just under 2 pct.
Added to that mix was a big miss in the January Chicago PMI number stateside, a rare dark cloud in the economic picture there in a week awaiting the release of last month’s payrolls. And although Wall St stocks recouped most of their early losses yesterday – and Apple was up about 3 pct after the bell on positive earnings and iPhone sales – investors are getting uneasy about whether markets overcooked the Trump rally without seeing the details of his economic plans.
The dollar has stabilized ahead of the Fed decision meantime and its index is back up about a third of a percent this morning. Treasury yields are also a touch higher. While the yen retreat helped Japan’s Nikkei, regional Asia bourses seemed encouraged by the broader dollar retreat yesterday, positive Chinese business surveys for Jan and the Apple results. European stocks opened higher. Brent crude is firm above $55.
Editing by Toby Chopra