In their third vote in five years, British citizens came out in force on Thursday in favor of the Conservative Party, resoundingly keeping Prime Minister Boris Johnson in power. Johnson has been a staunch Brexiteer and his large majority in the British Parliament should give him a strong position to navigate leaving the European Union.
Although many economists see Brexit as a negative for the British economy, the far larger threat has been uncertainty. As a result of this clear electoral victory for the Tories, the British pound exploded to an eighteen-month high.
Trading Friday for $1.33, the pound is still down nearly 10% in value since the British voted to leave the EU in 2016.
The path ahead will still be complex, as negotiations with the EU and Britain’s other trading partners could create pitfalls.
Worse yet, as the rest of Britain moved toward Brexit, the Scottish National Party won 48 of the 59 seats in Scotland and is making a renewed push for Scotland to separate from the United Kingdom, ostensibly to rejoin the EU, and there are rising calls from Northern Ireland to join with the Republic of Ireland. As a result, the once-great British Empire could see further contraction in the coming years.
**Trade Truce Boosts Markets
After months of talks, rumors, and denials, it appears that the United States and China have finally reached a deal to deescalate the trade war.
In announcements this week, both sides say they are reaching the final stages of a deal that would remove U.S. tariffs on Chinese goods, while China will increase imports from the United States.
Commodities markets rallied on the news, especially carrying soybeans, cotton, and pork higher as all three markets are heavily dependent on Chinese demand. Stock index futures contracts also shot higher, with many making all-time highs.
However, by midday Friday, most markets had given up most of their explosive gains, perhaps a disappointing reminder of the adage “buy the rumor, sell the fact.”
January soybeans traded for $9.07 per bushel, while February hogs and March cotton were worth 69.7 and 66.7 cents per pound, respectively.