03/07/2018 - May looks for Trade Solutions before Crunch Meeting Friday

May looks for Trade Solutions before Crunch Meeting Friday

British Prime Minister Theresa May’s advisers have come up with a new proposal for handling customs with the EU after Brexit as lawmakers in her party bicker before a crunch meeting of senior ministers on Friday. With less than nine months left before the country leaves the European Union, little is clear about how trade will flow as May is still trying to produce a customs plan that her divided Conservative Party can agree on.

May, who leads a minority government dependent on the support of a small Northern Irish party, has ruled out staying in the EU customs union, which groups EU members in a duty-free area where there is a common import tariff for non-EU goods. So far, May’s advisers have come up with two options, neither of which have the full support of her party.

As EU negotiators await the long-delayed proposal from London, it was reported that British officials have come up with a third model, though no details were immediately available and May’s office declined to comment on the report.

May will gather the squabbling ministers at her Chequers country residence on Friday for an “away-day” aimed at agreeing the contents of a “white paper” policy document. “There is going to be a lot of speculation between now and Chequers, some of it might even be true, but I’m not going to engage in it in advance of the away day taking place,” May’s spokesman said when asked about the third option.

USD

The ISM manufacturing report was a positive mark for the dollar on Monday. The index of national factory activity jumped to a reading of 60.2 last month from 58.7 in May. A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. economy. this positive figure was despite steel and aluminum tariffs causing disruptions to the supply chains, resulting in factories taking longer to deliver goods.

Latest positioning data remains broadly supportive for the dollar and is an extension of themes seen in currency markets in recent days. Dollar longs edged higher for a second consecutive week, euro longs got trimmed again with net outstanding long positions at their lowest in nearly two months. A rising dollar also translates into tightening financial conditions for broader financial markets given the U.S. currency’s dominance in global financing and trading markets.

Key Announcements

09.30 – GBP: Constructions PMI Forecast at 52.6 against a previous of 52.5