UK Secretary of State for Exiting the European Union David Davis has met with European Commission Chief Negotiator Michael Barnier to set out their opening positions.
Although the start of the talks at least marks the end of one point of uncertainty, the UK’s fraught political situation is creating significant confusion; markets are still hoping that this will result in the government opting for a softer approach to Brexit, however.
Investors are also busy picking apart the history of the latest Bank of England (BoE) Monetary Policy Committee (MPC) member Professor Silvana Tenreyro of the London School of Economics.
Tenreyro replaces Kristin Forbes, a notable hawk who has voted in favour of raising interest rates for several meetings now, so investors are keen to find clues that will indicate if Tenreyro is likely to also push for monetary tightening.
Nomura’s Jordan Rochester believes that Tenreyro is likely to be dovish at least to begin with, explaining; “Relative to the hawkish person she is replacing (Forbes) and the view that new members do not usually jump straight into a bias, we would assume a slight swing to a more dovish vote”.
Tenreyro could very well support the majority of the MPC in claiming that there is a need to look through inflation in order to assess the economic impact of borrowing costs on the wider economy.
She was one of 280 economists who signed a letter which was published in the Times before the referendum, calling Brexit a “major mistake”.
She reported in the Financial Times Christmas survey that she believed Brexit would “have a negative impact on the UK economy and Europe more generally”.
Markets are also slightly unsettled by comments Tenreyro made two years ago in favour of reforming the financial system to allow negative interest rates.
Meanwhile, the US dollar is being kept soft by the fact that the week will see a slew of speeches from Federal Reserve officials, with Charles Evans, Stanley Fischer, Eric Rosengren and…