Politics is once more coming to the forefront to affect the financial markets.
First off is an issue the markets seemingly forgot about amid the coronavirus pandemic and other global emergencies that have dominated the news over the past year: Brexit. The United Kingdom and the European Union are nearing the deadline for agreeing on specific details of how to handle Northern Ireland.
It has been a persisting problem since the Brexit negotiations first started that Northern Ireland wants to have a close trade relationship with the Republic of Ireland, which is an EU member. Thus, to prevent a hard border in Ireland, the Brexit agreement ended up creating a border between Northern Ireland and the rest of the UK. This is now creating problems in the domestic flow of goods within the UK, as Northern Ireland has to adhere to EU standards, while the rest of the Kingdom does not, and not all goods traveling to Ireland meet those standards.
Thus, the UK and the EU will once more be sitting down to negotiate how to handle the hard border issue. UK Prime Minister Boris Johnson is not expected to make things easy, as he continues to insist that the UK should not have to adhere to any EU rules, not being a member of the bloc any longer.
Shortly after the EU-UK meeting, there will also be a G7 summit, which is going to be attended by US President Joe Biden in person for the first time since he stepped into office.
The key topic during this summit is likely to be the coronavirus pandemic, and more specifically a better distribution of vaccines, especially of those surpluses that richer countries have, which poorer nations desperately need.
Nevertheless, a universal minimum corporate income tax that was agreed last weekend might also make a re-appearance during the summit as the world’s seven largest economies try to hash out the details.
As for the stock markets, today all major US indices will continue to trade in a subdued manner. Investors at the moment are too unsure of what tomorrow’s CPI reports will bring and refuse to commit to a trading trend until they see those numbers and estimate how likely the Federal Reserve is to be swayed by them to perhaps tighten monetary policy prematurely.
Inflation has already jumped at an impressive rate in China, so the markets anticipate tomorrow’s CPI numbers to overshoot the targets again.
