In the European debt market, the benchmark 10 year yields are ending the session mostly lower. The exception is the UK 10 year which is currently up 3.4 basis points.
I was reading a piece on Bloomberg’s markets live blog saying that Brexit 2020 may well be a flop. The point it made was that Brexit in 2016 was a shock. We know that hardly anyone saw it coming and when it happened the GBP fell sharply lower.However, this time, markets have had years of pricing in the UK’s new role in the world.
A more ‘in the background’ role for the UK?
Europe has been pulling together its fiscal and monetary policy to try and support the whole eurozone. However, the UK and its assets have seen global repricing as the UK is re-assessed as a medium sized nation with uncertain trade arrangements. Rightly or wrongly, investors have been downgrading the UK’s prospects. Also, don’t forget that a number of companies are still planning on removing their Headquarters from London.
Is risk tilted to the upside for the GBP
So, even if the EU and the UK don’t arrange a deal this year is a no-deal Brexit virtually priced in? Although the GBP could be expected to fall lower on a no-deal Brexit is the GBP pretty much well placed for upside from current levels? The risk of further downside is still in play as long as a ‘no-deal’ is still a possibility. However, for traders taking a longer term approach with a 2-3 year timeframe then the outlook looks firmer for the GBP the longer the outlook.
A tweet by Trump on Bolton’s book:
“Wacko John Bolton’s “exceedingly tedious”(New York Times) book is made up of lies & fake stories. Said all good about me, in print, until the day I fired him. A disgruntled boring fool who only wanted to go to war. Never had a clue, was ostracized & happily dumped. What a dope!”
Fitch Ratings has revised the Outlook on India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable and affirmed the rating at ‘BBB-‘.
The revision of the Outlook to Negative on India’s Long-Term IDRs reflects the following key rating drivers:
The coronavirus pandemic has significantly weakened India’s growth outlook for this year and exposed the challenges associated with a high public-debt burden. Fitch expects economic activity to contract by 5% in the fiscal year ending March 2021 (FY21) from the strict lockdown measures imposed since 25 March 2020, before rebounding by 9.5% in FY22. The rebound will mainly be driven by a low-base effect. Our forecasts are subject to considerable risks due to the continued acceleration in the number of new COVID-19 cases as the lockdown is eased gradually. It remains to be seen whether India can return to sustained growth rates of 6% to 7% as we previously estimated, depending on the lasting impact of the pandemic, particularly in the financial sector.
The humanitarian and health needs have been pressing, but the government has shown expenditure restraint so far, due to the already high public-debt burden going into the crisis, with additional relief spending representing only about 1% of GDP by our estimates. Most elements of an announced package totalling 10% of GDP are non-fiscal in nature. Some further fiscal spending of up to 1 percentage point of GDP may still be announced in the next few months, which was indicated by a recent announcement of additional borrowing for FY21 of 2% of GDP, although we do not expect a steep rise in spending. (more…)
