The Daily Update - Brexit / Trump / Theresa May

President-elect Donald Trump says he will offer the UK a quick and fair trade deal after he takes office this coming Friday. Although the UK will not be able to sign any new trade deals until it has formally withdrawn from the European Union, it is free to begin laying the groundwork for possible agreements before then. Trump also announced that he would be meeting Prime Minister Theresa May soon after he takes office adding ‘We’re going to work very hard to get it done quickly and done properly. Good for both sides’.

In his first UK interview Trump praised the Brexit decision, saying it was a ‘smart thing in getting out’ and believed the UK would thrive. The outgoing US President Barack Obama famously warned that the UK would be ‘at the back of the queue when it comes to trade deals’ if it were to leave the EU. Trump also predicted that the UK would not be the last country to vote to leave the EU. Singling out German Chancellor Angela Merkel for particular criticism, he believes she made a ‘catastrophic mistake’ by letting in 1 million migrants into Germany last year, adding that the EU was ‘basically a vehicle for Germany’. He went on to say ‘I do believe this, if EU countries hadn’t been forced to take in all of the refugees, so many, with all the problems that it entails, I think that you wouldn’t have a Brexit. It probably could have worked out but this was the final straw, this was the final straw that broke the camel’s back”.

Trump also took aim at NATO, believing that it has long been obsolete, suggesting he could even do a deal with Russia on nuclear weapons and ease the sanctions currently imposed by the US and EU. ‘I said a long time ago that NATO had problems’ whilst insisting it was still an important part of US foreign policy. His two main problems with NATO are that Trump believes it's obsolete, as it was designed and set up many years ago, and that for too long the US has been paying far more than its fair share with other countries ‘not paying what they’re supposed to’. On both counts Trump may have a point. NATO was set up nearly 70 years ago for a very different world than we are in today and over that time the US has accounted for approximately 70% of its spending.

Tomorrow we also have a speech by Theresa May where she is expected to indicate that the UK will fully break from the EU, signifying a ‘hard Brexit’. Media reports suggest she is willing to pull out of the single market and customs union to regain control of Britain’s borders, as well as urging ‘national unity’. Overnight the rumours of what’s in the speech sent sterling tumbling again. Touching 1.1983, that was a 31 year low excluding last October’s flash crash. At time of writing it had recovered slightly, trading at 1.2054.