The GPM Global Forecast is a bi-weekly, members-only article series for 2017. It provides analysis and short-term forecasting on key military, political, and economic events around the globe.

Brexit gets rolling in the United Kingdom

Theresa May has delivered a letter to the European Council that officially triggers Article 50, starting the two-year process of leaving the European Union. The letter stated that the UK government wants a ‘deep and special partnership’ with the bloc post-Brexit. It also called for consideration of implementation periods to avoid major market disruptions. In a glimpse of what could be the leverage being relied on by UK negotiators, it also suggests that a breakdown on major economic and political issues (free trade, status of UK/EU nationals, etc), could harm post-Brexit cooperation in the security realm on matters like fighting terrorism and crime.

The long-anticipated move comes as the UK’s Consumer Prices Index (CPI) jumped to 2.3% in February – up 1.8% from January. Food prices helped to drive the number up, and there are fears that this is the start of a wider trend as trade barriers are erected in what had previously been a liberalized trading relationship. Inflationary pressure is also coming from the plunging pound sterling. The currency is down around 17% since the referendum was held last year.

The extent of the pounds’ plunge – and the resulting inflation – will be influenced by how the negotiating process unfolds and, ultimately, by the final deal reached between the EU and UK. The next two years will be characterized by market speculation and knee-jerk reactions as London finally steps out of the EU and into an unknown future.

Refer to our recent article for a list of the major sticking points in the Brexit negotiation process.