Is the Brexit plan unworkable?

UK PM May hosts the Cabinet at Chequers today, where an agreement on the content of the government’s White Paper on a third post-Brexit trading arrangement, dubbed a “facilitated customs arrangement”, will be sought.

The White Paper is expected to be published next week. It remains to be seen whether it will have the backing of the Cabinet or the EU.

According to media reports, Brexit Secretary Davis and German Chancellor Merkel (who met the PM yesterday) consider the plans unworkable. The BBC has also reported that seven pro-Brexit ministers have discussed tactics to push back on the plan. Nevertheless, Mrs May said the Cabinet has “a great opportunity and a duty” to agree a blueprint.

If the media reports are correct then we could see another Brexit stumbling block and the pound could weaken further.

US economic data today are expected to reaffirm a strong labour market. However, wage growth is arguably still the more important factor the market will be focused on.

We see this printing at 0.3%m/m, in line with consensus and the prior out turn. The annual comparison is forecast to rise to 2.8% from 2.7%. Meanwhile, we forecast the headline payroll number to be 200K, but expectations may be dampened in the market today, after ADP was a little weaker than forecast.

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