Firstly, apologies for not writing this commentary over the past few weeks.

So….shock (1) BREXIT soon followed by (2) TRUMP…and as you know things happen in 3’s so could (3) be the start of the EU breaking up as we know it. As you are aware Italy is holding their own referendum (constitutional reforms) on the 4^th December. The vote is centred on complicated legal changes to Italy’s constitution that would, in effect, make it easier for any ruling party to pass laws and weaken the power of the senate, the upper chamber of parliament. Those in favour of the changes say the change is necessary to allow Parliament to pass large and necessary economic and political reforms which to date have proved an almost impossible task. As things stand the no camp is leading but as usual it’s the undecided voters that will sway the result. As far as the polls go, well you know what the polls predicted for (1) and (2) and how badly they got mauled. Current Italian PM Renzi has stated he will resign if he loses, though he has since retracted this statement for the good of the referendum. I guess he saw what happened to ex-PM Cameron who made the same comments. A loss for Renzi could trigger an early general election (elections are in 2018), delay crucial reforms and set in motion advanced political chaos at a time when the Italian economy is still gloomy and investor confidence and public debt (not to mention the precarious banking system) battered. In other words dear friend, dark clouds are looming over the horizon and another battering for the “establishment” is looking more likely.

Brexit: nothing new really apart from the Supreme Court ruling and the EU saying much of the same, if the UK want free trade they must in part allow free migration. In other words, nothing new though the ruling by the Court will be a major factor on how easily or quickly for that matter the Conservatives and PM May can get Brexit started. Was it a surprise to learn from Sky News re the leaked memo that the Government don’t have a clue how to proceed with Brexit? Absolutely not. After 40 years of being in the EU how does one start to untangle the web of laws that are so ingrained and entrenched in our daily lives. I was not surprised either to read the +- £100bn black hole that the Treasury will have to plug post Brexit. I am afraid that those people that voted YES didn’t really take into consideration who and how the government was going to cope with the reduced income. Tel you what, cut benefits, cut foreign aid, cut building projects (HS2), cut spending and turn the UK into an economy like Benin. That will stop people wanting to come over and work and invest. Job done.

Lastly, in case you have not seen the USD has had a monumental rise since the US elections rising to trade at EUR1.0600 … seems Trump is not such a bad guy. The FOMC hold their final meeting on 13/14 December and following up from Pres. Yellen’s comments on 2^nd November the financial markets are preparing for a rate hike (+0.25%). I have written previously I think they could actually raise rates more than 0.25%, but then again I was also assuming that Ms Clinton was going to win. With a Trump win, the FED are likely to take a more cautious approach and thus 0.25% is the more likely scenario. As regards the coming months we are now fully expecting the USD to break through PARITY and continue its merry way.

As for the GBP … holding up around 1.24 vs the USD but for how long. At some stage the bottom will open up and like the EUR, the GBP will start to weaken. However we are likely to see the GBP (potentially) remain buoyed vs the EUR and the 2 fall in unison vs the USD. USD is king, long live the USD.

Have a great weekend

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