The UK’s bargaining position could be strengthened versus the remaining EU27 over the terms of its Brexit following the unexpected win by Donald Trump in the US presidential elections, analysts at Swissquote Bank have said.
Peter Rosenstreich, head of market strategy, said that the Trump victory would give those in favour of Brexit an “ace up their sleeve” in light of the relatively deadlocked negotiations as they have been thus far.
“That is because in reality both economies need each other equally, despite occasional hostile rhetoric. Yet, the scale could be tipped in the UK’s favor with the inclusion of outside trade agreements. Sitting US president Obama, prior to the EU-referendum, indicated that the UK would not get preferential treatment and would have to go to the back of the line. How things have changed. On the campaign trail Trump was extremely supportive of Brexit and quick to provide himself accolades for calling the historical outcome.”
“In addition, consistently drawn parallels between his campaigns and the Brexit referendum indicate deep support for UK independence. Pro-Brexiteer Nigel Farage was the highest ranking UK political figure to have shown his support for Trump. Trump’s comments that Britain would not be ‘at the back of the queue’ indicate that he would be willing to fast track a UK trade deal.”
“What a Trump presidency will look like is unknown, however we suspect that there is enough evidence to predict a quick trade deal will be on table for the UK which they can use to leverage in EU negotiations. Firstly, the US president has significant influence over trade and with a republican house and senate could move without resistance. Secondly, Trump bragged about his deal making prowess and will be eager to show the world. Thirdly, slightly anti-Europe comments on NATO and EU, suggest that the EU/US trade agreement will be challenging. Finally, Trump more than anything likes to be right. As the US president Trump is in a unique position to define the direction of Brexit. We remain constructive on GBP in the near term as we don’t anticipate political comments to indicate a ‘hard’ Brexit.”
Within Continental Europe meanwhile there are other events ongoing that could serve to weaken the remaining EU’s stance towards the UK, according to Yann Quelenn, market analyst at Swissquote Bank. The argument here is that despite significant austerity measures and monetary policy response to the financial crisis that took place from 2008, the politics of Brexit and Trump point to further changes withing Europe politically.
“This is why we are closely looking to the next major event that will be held in Italy with the constitutional referendum next month,” Quelenn said.
“A referendum would give more power to current Italian leaders whose hands would be free to implement regulations from European institutions. The situation is going well in Italy and we do believe that austerity policies, as well as Trump’s election could trigger another vote against the Italian elites. From a data perspective, the Italian deficit forecast was recently revised higher at 2.3% while the Italian government initially agreed [to a] 1.8% [level]. The deficit is growing at a fast pace. Currency-wise, the euro is likely to swing. Nonetheless, a referendum is not a sure bet. The Brexit still has a decent probability of being rejected by the UK Parliament if the [UK] Supreme Court decides to oblige the parliament to vote for the acceptance of the referendum.”