Regarding the IMF’s warning of a hard Brexit, UK’s inflation, currencies and commodities, Mihir Kapadia – CEO and Founder of Sun Global Investments, has said:
“IMF’s warning of a hard Brexit:
While Prime Minister Theresa May has been focused on the Brexit talk which has a definitive deadline of Friday 29 March 2019, the fear of a Hard Brexit continues to be a worry for markets. The International Monetary Fund (IMF) has joined a host of other think tanks in warning of the catastrophe ahead should the UK end up with ahard Brexit. The IMF has emphasised the immediate negative impact not just for the UK, but also for the EU’s economy as a result of such a deal.
The IMF statement stresses the need for both the parties to achieve a viable Brexit, something Germany’s Angela Merkel has also emphasised.
After the Bank of England’s decision to increase the benchmark interest rate for the first time in a decade earlier this month, financial markets in the UK will be focusing on the UK consumer price inflation figures, due on Tuesday. Inflation in the U.K. accelerated following the pound’s collapse after the Brexit vote last year, and prices have grown at around 3% since early 2017, squeezing consumer spending and dampening growth.
The UK pound declined in Asian trading after weekend reports indicated 40 MPs had signed a no-confidence letter on Theresa May, calling the PM to resign, adding further political pressure to UK government. Sterling declined 0.5% against most major currencies. The pound has advanced 6.5% against the dollar this year, but remains down about 12% since the U.K. voted to leave the European Union in June 2016.
Such political difficulties will add to the dovishness and caution on the part of the Bank of England and will be negative for the Pound but positive for Gilts.
The dollar is a little higher in Asian trading. Doubts about whether Republican lawmakers will be able to push through their tax overhaul in coming weeks seem to have stalled the rally in the dollar that we have seen since mid-September.
Oil prices are little changed in flat in Asian trading, after declines in the U.S. session on Friday. WTI is down 0.1% at $56.69 while Brent is down 0.2% at $63.59. Prices are supported maintaining recent strong gains ahead of the OPEC meeting later this month, when the current production caps will likely be further extended.
Gold prices are 0.1% higher after falling 1% Friday. Gold has been weak for the last three weeks as the dollar has rallied but may see a better trend now as the dollar rally falters. The gold price is up 0.1% at $1,276.17 /troy ounce.”