Finally, some good news for the European Union! The U.K. seemingly rejected a hard Brexit while President Donald Trump's troubles with former FBI director James Comey seem to be getting worse. The standoff between Qatar and its neighbors appears to be widening while Turkey's latest growth numbers were nothing short of explosive. French President Emmanuel Macron's party won the first round of parliamentary elections in France pointing to similar sentiments in Germany's upcoming election, all good news for the EU.
Theresa May gambled with the future of the U.K. by calling snap elections only two weeks before negotiations with the EU on Brexit began in the hopes of consolidating power. Following the election and a major pickup in seats she would be much stronger. She would dictate terms. She would speak for the U.K. unequivocally and she would get the Brexit she wanted. While her Conservatives did win the most votes in the parliament, they need the support of an ultra-conservative party of Protestant Northern Irelanders to form a government. Meanwhile, the Labour Party lead by Jeremy Corbyn picked up the most seats signaling uncertainty in the eyes of the electorate towards Brexit. Post-Brexit referendum, the British pound has lost considerable value and many multi-national banks are planning on leaving the country. All of this meant a weary electorate that handed May her first defeat as prime minister.
The future of May as prime minister and the Conservatives leading the country is shaky at best. Another snap election would only cement Corbyn's gains now that Labour is again a bankable party. Even without another election, Corbyn could lead a minority government if he entices a few Tory deputies. In short, the future of the U.K.-EU relationship is far from certain and the future of the U.K. itself is in question. Apparently a polarized legislature is the new normal. Look for the pound sterling to continue to decline until a more solid solution is found in government.
Perhaps the most watched congressional testimony in recent history, Comey's testimony was riveting. On a number of occasions he directly accused President Trump of lying. He described an awkward dinner with Trump practically out of the Godfather in which Trump asks for his loyalty and Comey politely declines. While many of the things Comey testified about were damaging for Trump's credibility, there was no smoking gun. If this is the worst that Trump has done, then Comey's predecessor, himself an FBI director and current special prosecutor, Robert Mueller, will be unable to recommend any legal action against Trump. At this point it's the word of a sitting president versus that of a former FBI director. While democrats and "Never Trump" Republicans will be disappointed, there is no path to impeachment and removal of President Trump following Comey's testimony.
Speaking of awkwardness and President Trump, Trump joined allegations made by Saudi Arabia, the UAE, and Egypt among others, that Qatar was not doing its utmost against regional terror. The irony is, Trump himself sat in on a news conference with the Emir of Qatar and said the United States would be selling Qatar, "beautiful weapons." Why would the U.S. sell arms to a country it suspects of not helping the war on terror? If this is information the United States has had, why did it continue to sell weapons to Qatar and continue to keep over ten-thousand U.S. troops in its operations center in Qatar? The answer is probably because Qatar supports parties that have lobbied to democratize monarchies in the Middle East. In this respect, it makes sense that these monarchs would not be fans of Qatar and do whatever they could to freeze out the Qataris.
Unfortunately this has left many parties that are allied with both countries in a difficult position, including Turkey. Turkey won't abandon its friends the Qataris nor will it its other friends in the Middle East because of internal differences.
The latest numbers out of Ankara reveal the Turkish consumer is back as growth was nearly double expectations, hitting 5 percent in the first quarter. The benchmark Istanbul stock exchange had priced in most of this information from reports of high-flying yet still rose on the news. The Turkish lira also continued its rally gaining against the dollar. Finally, Turkey's credit-default swaps, or CDSs which are insurance against political/economic instability traded at their lowest level in 28 months, signaling continued growth in the future.