The GPM Global Forecast is a bi-weekly, members-only article series for 2016. It provides analysis and short-term forecasting on key military, political, and economic events around the globe.

Inflation Uptick in the United Kingdom

November inflation came in higher than expected in the United Kingdom, reaching 1.2% year-on-year – higher than the consensus estimate of 1.1%.

The numbers are being closely watched ahead of Brexit negotiations next year, and the impact these talks might have on the pound sterling. The UK currency has taken a pummeling since the Brexit vote earlier this year, closing at nearly 1.50 USD on the eve of the vote and now trading at around 1.27 USD. Uncertainty over the course of EU-UK exit negotiations have fueled pound sterling’s volatility through the latter half of 2016, and this trend will surely continue into 2017 and potentially beyond.

Inflation is a key indicator to watch for several reasons. For one it holds clues as to how Brexit may impact British consumers, as the cost of imports will surely increase due to the new normal of a weakened sterling (with the million-dollar question being: how much?). Second, the pace of inflation will influence how Bank of England Governor Mark Carney will seek to guide the UK economy through the tumultuous waters of the Brexit era. High inflation and rate hikes by the US Fed could force Carney’s hand on UK hikes, which would bring some negative growth consequences right when the UK economy is already reeling.

One positive here is that there has been a considerable amount of deleveraging in terms of UK household debt since the financial crisis in 2009.

The next meeting of the Bank of England Monetary Policy Committee will be February 2, 2017.

Battle of Aleppo Coming to a Bloody End

The Battle of Aleppo is all but over; the Syrian government has won. What remains is to determine the fate of the remaining rebels in eastern parts of the city, and the long-suffering civilians caught up in the crossfire.

A ceasefire deal was supposed to do so, allowing both rebel fighters to leave the city and civilians to either leave with them or transfer into government-held sectors. Interestingly, and quite possibly a sign of things to come, the deal was negotiated by Russia and Turkey without any involvement from the United States.

That deal has since broken down, and heavy shelling has resumed in rebel-held areas of the city.

Here we see the matrix of disparate interests in the Syrian civil war laid bare. The Syrian government wants to finish the rebels in one dramatic swoop, ending the threat they pose once and for all; the Russians want to re-establish stability and paint themselves as the responsible power; the Turks want a say in post-war Syria; the Iranians want to be kept in the loop and are reportedly angry that they weren’t consulted in this latest ceasefire deal – and all of them want to cut Washington out of the political process.

The rebels are routed, but the end of the Battle of Aleppo is not the end of the Syrian civil war. There is still a struggle to define the post-war political order, and that fight is just getting started. The key takeaway here is the lack of a US, even a Western hand in the process. Russia has apparently achieved its presumed goal in its daring intervention back in September 2015: it is one of a handful of voices that actually counts.

Another takeaway is the growing closeness between Russian and Turkish policy in the area. It would appear there has been a deal cut in terms of Turkey’s post-war interests, possibly regarding the status of the Syrian Kurds and/or protections for Turkmen populations fighting against the Assad regime.

China’s Emerging Strategy to Counter Trump on Taiwan

President elect Trump’s assault on the ‘One China’ policy undoubtedly took Beijing authorities by surprise. It is, after all, the cornerstone of US-China relations and in essence non-negotiable by the Chinese authorities’ own nationalist logic.

Yet it’s hard for Beijing to respond to Trumps’ comments head-on. For one, he isn’t the president of the United States yet. There’s also the problem of just how important their bilateral trade relationship is; a fallout in US-China relations would have economic consequences for Beijing, which is ever watchful of anything that could disturb the social order in China.

Thus, the obvious play is to punish Taiwan for the US breaches in protocol. Doing so serves several purposes: it alienates the current anti-PRC president of Taiwan, it demonstrates that questioning the One China policy will not be allowed, and most importantly, it does so without triggering a spiral of animosity and tit-for-tat punishment in US-China relations (which might just be the original intention of the Trump camp, if there was any intention). Punishing Taiwan is far less likely to generate blowback from the United States, as the island is a largely unknown abstract in the minds of many Americans.

The pressure points that Beijing would seek to take advantage of would be: Taiwan’s remaining official diplomatic relations (22 countries in all), Chinese tourists to Taiwan (a contentious issue anyways ever since President Tsai was elected last year), and restrictions on Chinese investment into Taiwan (again a contentious issue given Taiwanese sensitivities to growing Chinese influence within Taiwan’s economy, as evidenced in the Sunflower Movement of 2014).