Pow­ers of ne­go­ti­a­tion

Cal­lum McGrouther of Cur­ren­cies Di­rect re­flects on how the world’s most pow­er­ful po­lit­i­cal lead­ers are af­fect­ing the mar­kets

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It has been a fiery start to 2017, with the mar­kets hav­ing to de­ci­pher the out­come of speeches given by po­lit­i­cal fig­ures such as Theresa May and Don­ald Trump. As a re­sult, ster­ling has been the big­gest mover; af­ter hit­ting wor­ry­ing lows early in the new year, it has re­bounded on the back of Theresa May warn­ing Euro­pean lead­ers that the UK is pre­pared to crash out of the EU if she can­not ne­go­ti­ate a rea­son­able exit deal.

Al­though May said that the UK could be the EU’s “best friend” if Ar­ti­cle 50 talks went well, she also said she was pre­pared to walk away, which sent alarm bells ring­ing around the eu­ro­zone. The Prime Min­is­ter’s plan for a clean Brexit in­cluded a call for the UK to leave the sin­gle mar­ket and to avoid the EU’s im­mi­gra­tion rules and be­ing sub­ject to the Euro­pean Court of Jus­tice.

While all eyes of late have been on the Brexit plan, there is ex­pected to be a shift in the mar­ket to po­lit­i­cal risks within the eu­ro­zone as the French, Ger­man and Dutch elec­tions take place this year. The po­lit­i­cal un­rest across the eu­ro­zone and rise of the anti-pop­ulist par­ties could be a de­ter­min­ing fac­tor in po­ten­tial euro weak­ness. In ad­di­tion, the Euro­pean Cen­tral Bank is still in the mid­dle of its eas­ing pol­icy, which could put fur­ther pres­sure on the currency through­out the mid­dle and back half of the year. cur­ren­cies­di­rect.com

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