The Monday note - 9 July 2018

• The FTSE 100 dropped 19 points last week to a close at 7,617.7 on Friday, as investors awaited developments on Brexit. The 10 year Gilt yield hardened to 1.27%.
• The pound initially rallied this morning against the US dollar and the euro on news that the Brexit secretary David Davis has resigned. Dominic Raab, formerly the Minister for Housing, has been appointed as his successor. 
• The Bank of England governor, Mark Carney, gave an upbeat assessment of the UK economy in a speech last week. This prompted further speculation that the base rate could rise in August. 
• The UK services PMI index read at a robust 55.1 in June, which is unchanged from May – a reading of over 50 for the index suggests growth. 

Chief Economist comments: 

Last week, Prime Minister May laid out a plan for leaving the EU that the media quickly branded a soft Brexit. The additional sting for Eurosceptics is that May’s proposal will inevitably be diluted further in negotiations with Brussels. Standby for lots of speculation on a leadership bid against May. However, Brexit has created a situation where being Prime Minister has become a poisoned chalice – as the person holding the job will eventually have to tell the public that Britain will not get a “have your cake and eat it” deal with the EU. The front runners to become PM could decide it is better to leave May in the job for now.