European future. We will look back at that result and what has changed as the negotiations finally get underway. Well speak to a member of the house of lords who thinks that brexit want happen. Wont happen. We will also have the director of europol. This is what were getting. A little bit of news in the form of pmi. This is what theyre coming out with. Falling to 54. 7. Below forecast. We were expecting a figure of 56. 8. Its coming in at 57. 3. That is for manufacturing. If you look at the Services June pmi, falling by three percentage points. Seeon to the data to whether we are seeing any impact from that weaker than expected pmi. Overall, Global Equities mixed after we did have some fed speakers saying they will do little to alter projections for the path of Interest Rates. Oil fluctuating. Below 43 a barrel. Out for isould look pound as we try to assess what the brexit vote, the oneyear anniversary, means for the brexit vote and e. U. Nationals living in the u. K. Lets get to first word news. Sebastian the European Central bank has made a play for power. A key issue in brexit talks between the e. U. And the u. K. The central bank wants to change its legal statute to be given a clear legal competence 3 4 of trading in euro denominated interest swaps takes place in britain. In the u. S. , Center Republican leaders have issued a Health Care Proposal. The plan was immediately opposed by a group of four conservative senators, rand paul, ted cruz, ron johnson and mike lee. It could threaten a position passage of the bill. President Trump Obamacare is totally dead. Were putting in a plan today that is going to be negotiated. Some democratave support. But they are obstructionist. We wont get one matter how good it is. Sebastian President Trump has named rudy johnson as ambassador to the u. K. Firm. He ceo o centralrnor of mexicos bank says it is taken the right steps for inflation to reach its 3 target. Speaking as closely to bloomberg after raising borrowing costs for the seventh time in a row. The last months have been good months. We had a rocky year last year. I think that a lot of the correction that has taken place has been the result of policy actions we have taken in the monetary side, on the fiscal side. Throughy, were going dynamics that is consistent with a oneoff weak inflation shock. Global news 24 hours a day powered by 2700 journalists in 120 countries. This is bloomberg. Francine now, the Prime Minister theresa may told e. U. Leaders that almost all 3 million e. U. Citizens in the u. K. Will continue to live there after brexit. Theproposal was met with tepid reception from leaders who stressed that many issues remain unresolved. The state ofabout the negotiations on the u. K. s departure. The first talks have taken place and theresa may clearly said that e. U. Citizens to have been in the u. K. For five years will retain full rights. This is a good start, but there are still many questions. Francine bloombergs matt miller joins us from brussels. Covering this e. U. Summit. First of all, what do we know that is on offer and good morning . Matt good morning to you. We do know that any e. U. Citizens would have been living riti loo at the samea rights in regardsin to health care or in regards to pension. If you have lived there for less than five years and you are an e. U. 27 citizen, you will be able to stay and clock up that time until five years is over and then apply for those same settlement rights. Thereafter, a certain cutoff date, and that is not yet clear, sometime between march 2017 and march 2019, you will be given a twoyear grace period after brexit, and then you will be allowed to apply for some sort of legal resident status, but those are the Broad Strokes or the details we know so far. And the concerns revolve around which rights you will have. U. K. Citizen rights or e. U. Citizen rights because there are some stark differences there. Francine what remains unresolved . We dont know the start date, the cutoff date. When do we find out . Matt that is the key issue. Key sort of the logistical issue. What day is the cutoff day. On mondaynd that out when theresa may gives those details to u. K. Politicians. But, also, will be European Court of justice be able to rule over issues that e. U. 27 citizens have in the u. K. . That is going to be a problem because certainly theresa may does not want that to be the case or she wants them to fall under u. K. Courts jurisdiction. Citizenple, an e. U. Would be able to bring and a spouse or Family Member from outside of the e. U. With no problems. In the u. K. , there are tighter restrictions concern amendment minimum income requirements. So these are some of the discrepancies between the rights of the u. K. Citizen and an e. U. Citizen that need to be resolved. Francine matt miller will be live throughout the day. For joining me now is jeremy stretch. Brexit you have been coveringbrexit. You have been covering brexit. What do we know about how negotiations are going . And, still a year on, actually, we seem to be less clued up. I think there are certainly realization inof that context because, of course, here we are we have had a lot of politicals trees from the e. U. Political posturing. The primet stance by minister the back end of last year. Yet, of course, the election has thrown a lot of that into a great deal of doubt. There is a question as to what u. K. Is isof the this juncture. We have literally just started negotiations 12 months from the vote. That ticking timeclock under the article 50. The abilityess of to facilitate negotiations which will provide any opportunity for favorable trade relationships are being pushed into the middle distance. That causes a great deal of uncertainty in the market. Francine wanted to find out on cable or euro pound . Two obvious issues. In the sense of the go back to when the election was caused in april, sterling was rallying on the presumption that perhaps the harder line elements of the conservative party were expected to be put in a little bit of a degree of check. Now in view of the uncertainties on the political spectrum, that is not the case. We will have to see how the u. K. Stance is going to lay out and the trade relationships may be placed beyond 2019. We have seen the chancellor over the past two days about the need for a transition, avoiding the cliff edge. If there were to be a cliff edge, that would be detrimental for u. K. Expectations. Francine do you look at europound more than cable . That is probably the best way because the dollar leg of the equation has its own uncertainty in relation to the fed. Eurosterling is the way to look at the euro dynamics. We have seen that in the uptick on the righthand side of the chart. Are we done . No, i dont think we are. The 90 pence target is an obvious one from a Strategic Perspective in the near term. We could be there by the end of the summer. Francine is this boe driven more than negotiations with brussels . I do not think the bank of england should be integral to that unless you think that the bank of england is in play. Francine now on the u. S. Senate Republican Leaders have issued their Health Care Proposal aimed to win support from moderate and conservative wings of the party and was opposed by four gop senators that puts the bills passage in jeopardy. At the white house, President Trump says he does not have recordings of his conversation with jim comey. On may 9, President Trump suggested the existence of recordings. In other news, 34 of the largest banks operating in the u. S. Have cleared Federal Reserve stress tests of the ability withstand economic shocks. We heard from Jerome Powell saying that this years results show that even during a severe recession our large banks would remain wellcapitalized. Five ofook at four to these things, what will move the dollar more . Is it the fact that President Trump could be distracted by a lot of these investigations and not do text form or is it fed related . There has been a lot of disappointment thus far because of the lack of pushing forward in terms of the fiscal backdrop. That has been a cause of concern. The facts of the banks pass the stress tests, perhaps that adds to the momentum in terms of bank deregulation. Ultimately, of course, comes back to the fed and the fed dynamics, which are related to the growth trajectory. Everything is inextricably interlinked with the ramifications of the white house and implications on growth. All those factors are melted in together. Francine went of the markets start believing what the fed is telling them, that they will hike three times . Do you think thats never going to happen . I think they are waiting for hard data. All Central Banks should always argued that they act in relation to the data. In a sense, we probably need to see some degree of residual support from the data. I guess the most important dynamic for not just the Federal Reserve but a number of Central Banks is the fact we have seen labor markets strengthening, and Unemployment Rates coming down. We have not seen an increase in wages. The traditional relationship between the phillips curve which yellen Still Believes holds true, we need to see evidence of that. If we saw evidence into the second half of the year, i think markets will start to believe what the fed have been telling us. Francine what is your target for dollar . Jeremy in the context of euro like at higherld because we think the compelling fundamental story is rather more dynamic in europe than in the u. S. Even with the fed hiking, it is still the case that the dollar is not going to get the trajectory it would assume, because we are seeing other Central Banks moving towards number of other currencies rather than necessarily being the dollar. Francine if you d look at the Central BanksBalance Sheet, we goinglot, are to be a lot wiser about when the Balance Sheets will be redressed . The question is do you seriously think the fed is going to unwind the Balance Sheet quickly or is it going to be a slow and progressive process . That is not just a fed story. When we discuss Central Banks, it is going to be a case of it is not going to be reinvesting maturing bonds. That is going to be the way to gradually erod the Balance Sheet. Yellen does not want to see the Balance Sheet reduction being seen as monetary the presumption of very slow and progressive process. Fed holdingsn of are sub five years. Youve already reduced the Balance Sheet steadily. Francine thank you very much. He stays with us. Lets get straight to the Bloomberg Business flash. Hasstian allied irish bank risen as it returns to the market after the state bailout. The government raced 3 billion euros over a 27 stake in the lender. 679 shares valuing irelands secondbiggest lender at 12 billion euros. Britains first new Nuclear Plant in a generation may cost consumers 30 billion pounds and higher electricity costs. Five times more than ministers expected. They urge the government to come up with a plan b for electricity in case of a collapse of the hinckley c project. That is the Bloomberg Business flash. Francine thank you so much. The bank of mexico he says the peso has room to appreciate after the central bank raised borrowing costs for a seventh time. Carsten spoke exclusively to bloomberg. I would say it is not unreasonable. Comment should not be taken as a central bankers forecast or a central bank is objective. Be reasonable if you take into account the strength of the mexican economy. If you take into account, the policies we have undertaken. Also, the reasons that generated the depreciation that was not sustainable. In yes, i mean, think it is the realm of the feasible. Francine jeremy stretch still with us. Look at the peso. Let me bring you to my chart. This has a like to do with the trump administration. Arstench does mr. C have control over his currency . You are absolutely right. That is reflective of the uncertainty in the market and the relationship to trump. That is still an issue to wait to see how that renegotiation process will play out. We have seen a very impressive timing cycle. The bank of mexico is close if not and of the cycle. Clearly, they want to rein in the inflationary pressures of that oneoff adjustment in the currency. It is going to be the case with issuing Political Risk in mexico and also an ending of the tightening cycle that maybe it will be tough to see it moving from these levels. I think it will oscillate at the 18 threshold in the nearterm. Francine what is your call on emerging markets overall . This is partly in inflation story linked to oil. Jeremy in the context of the e. M space, what we argue is that in a Global Economy, there is an opportunity for some of those currencies to do well. The question is, you need to differentiate between those who still have structural issues and those that are looking inflatable. Those that have political uncertainties are in specifichip to commodities, those of be the underperformers. You just need to differentiate in that context. Francine what is your favorite currency . Is currencies are good bet on emerging markets . May be that push throughs the reforms needed . Jeremy you want to look at those that have got reforms on the agenda or those that are structurally trying to push forward. I think there are opportunities in the space. I think its going to be a case of differentiating in terms of that context. Historically, we like india, for example, where there is plenty of room fo Structural Reformsr. Those are t sort of metrics we will be lookingh at. Francine up next, as the Brexit Debate heats up, the ec makes a play for power overb euro clearing. This is bloomberg. Francine you are watching bloomberg surveillance. The European Central bank has made a play for power over the clear the clearing of euro denominated bonds. The central bank seeks to change its legal statue to be legal confidence over clearing. That is what it said today. Lets talk about the ecb. Jeremy, first of all, on euro clearing, is this power struggles . Individual countries want the power to regulate themselves the ecb is saying we should be in charge. Jeremy that will be one of the issues will continue to see on an ongoing basis. In the relationship between the city of london and the euro zone is going to be an integral part of the negotiation process, but other different nations among the 27 have different sensibilities. What make sense if you are going haveve euro clearing to the ecb as a regulator and the way that they have done in terms of the banking sector. In that context, the concentration of power may cause some consternation in some other european capitals. Francine do we have any idea of how it goes or because it is political and we are in the midst of political brexit negotiations, it could go either way . Jeremy that will be one of the issues. We do not quite know how the negotiation process is going to proceed in how much flexibility there may be on either side because, of course, negotiations start from positions being entrenched and one would hope there would be some degree of pragmatism over time but i suspect that pragmatism will take a considerable time to come to the fore. Those positions could become entrenched it we see those headlines that proved to be damaging or at least highly volatile in terms of the ould causeips that w in terms of markets for euro and sterling. Francine when you look at the eurozone, we had weaker than expected pmi. Is it linked to brexit or currency . The trend is on the way up, but unemployed is still stubbornly high. Jeremy in the context of the pmi, you have to put them in some degree of context in terms of the rapid appreciation in the manufacturing sector. We were due for a consolidation. We have been running on an upward trend over the last 89 months. You would expect some degree of consolidation. I would not overplay i t. It is not implicit in suggesting that eurozone momentum is diminishing. I think it is the case that, yes, there are concerns about labor markets but they are showing signs of improvement. There are still reasons to suggest that more Structural Reforms are necessary. Is aware of that. From a functional perspective, the euro zone macro stories encouraging. And we regard the ecb in a position to start the road back on a stimulus and we have been bullish on the euro. Francine because of the election in france, we underestimate the political scene. We have italy, we may have early elections and we do not know which way that will go. Jeremy thats true. Markets have downplayed the risk in europe on a substantive basis is the first round of the french election. The german election has been taken off probably for good reason but nevertheless, there is the elephant in the room in terms of the italian system. We wait to see the timing and the ultimate result of that process. I guess the question from a market perspective is after a number of euro skeptic, that is the only thing that is a common theme. Think it will be a conglomeration of views around other factors, i think that fragmentation of italian politics may reduce the Political Risk in terms of market performance. Francine thank you for joining us. Jeremy stretch. At cibc. Up next, one year on from the e. U. Referendum result, all the latest on the brexit negotiations. We will speak to the founder of and member of the house of lords who thinks