Can you believe that next week we are in March? While for many of us in the U.S. that means the last full month before finishing taxes, in Europe this year it has a very different meaning.
It was about a year ago when British Prime Minister Theresa May sent the official letter informing the European Union that the UK was invoking Article 50 of the Treaty on European Union, which kicked off the official two-year Brexit process.
As we've mentioned previously, businesses face a crossroads one year before the Brexit deadline. As we approach that one-year mark, we are seeing at least one big corporation make a move toward Europe.
Unilever, a large consumer goods brand, makes products that are used by 2.5 billion people every day around the world. Those products include Ben and Jerry's and Breyer's ice cream, Dove soap and Lipton tea.
Unilever has a dual-legal structure that includes two parent companies – one in Rotterdam, Netherlands, and one in London. Investors have been pressuring the company to simplify its structure, meaning it needs to choose either Rotterdam or London as its headquarters.
While the official decision is expected to be made early next month, press reports indicate that the corporate board is leaning toward Rotterdam. If those reports prove true, that would deal another blow to the U.K. and PM May's efforts to negotiate better terms for its European divorce.
The situation has changed a lot since last year at this time. Back then, the U.K.'s economy had been growing after forecasts of a crash just after the Brexit vote did not materialize. Meanwhile in Europe, there were concerns about a series of high-stakes elections: First in the Netherlands, then France and Germany – and whether or not the 2016 populist wave would continue.
In the end, the votes proved to be supportive of the European Union, and while we have an Italian election just around the corner on March 4, expectations of political upheavals in Europe have waned.
This reality has been reflected in the price of the euro. In fact, analysts are expecting a strong euro of 1.30 or higher this year, while last year, market sentiment was focused on how quickly the euro would get below parity with the U.S. dollar.
My View: The extreme views that we often see markets take tend to distort the real nuances of Brexit and whether it will ultimately be a success or a failure. However, I don't think there's any question that the Continent has the upper hand in the battle for Europe – at least for the moment.
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