Daily Roundup 4/2/2021

Contortions

• EUROPE

The charge of the Brancaleone Army

The EU, pushed also by Frankfurt and Paris, would be close to trying to force the flow of euro-denominated money invested in derivatives out of London and into Paris, Amsterdam and Frankfurt.

The main reason for the City's pre-eminence in the currency and financial markets is historical, the stability and respectability of sterling compared to other currencies and the liquidity of the British market.

The EU's choice would be attributed to a divergence in financial regulation between the trading bloc and the UK, but such substantial differences as to lead to such a drastic turn have yet to be identified, and in the meantime the Americans themselves continue to have London as a reference point for the disposal of monetary derivatives and, above all, management and regulation of the international currency system.

With the possibility of the dollar losing its status as the central currency of the international financial system as a result of inflationary pressures, the EU - and in particular the Germans, the Dutch and the French - believe they can steal this position from an abandoned, weakened and lonely UK (with the pound directly in line to succeed the dollar).

Meanwhile the Japanese are investing in British debt.