topspin
Test Debutant
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- Jul 16, 2018
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There is a sense of urgency given the increasing uncertainty with just six months to go before Brexit is due come in effect, there has yet to be an agreement for the EU divorce. Given the political indecisiveness stemming from weak political leadership over the matter, it would not surprise me if the deadline set at the March was to be extended in order to smooth the transition. But assuming everything goes as stipulated by the EU with the deadline given, which of the following scenarios do you see being the most likely outcome out of the EU divorce?
No Deal – Few months ago this was considered a remote possibility but due to the lack of progress in a Brexit agreement and following the release of May’s Chequers Agreement the probability of this scenario may now be as high as 40%. A hard Brexit would favours UK markets due to the main constituents earning their income is in dollars. However policymakers anticipate this will create a negative shock in the UK economy causing unwelcome rise in inflation – reducing real income growth.
Canada + - The UK is able to set its own rules and regulations and is able to strike bilateral trade deals with other countries and envisage a comprehensive free trade agreement with the EU. There is the complicated issue of the Irish border since the EU have said under this proposal they will only consider Great Britain and not N.Ireland
Chequers – This effectively would bridge the gap between a “hard” and “soft” Brexit which would avoid the need for tariffs and border checks. In this scenario the market will anticipate reasonable economic growth with gilt yields expected to rise and see equities perform in line with global markets
Soft Brexit – The UK keeps a much closer alignment with the EU and potentially less disruptive to the UK economy. Economists would expect this to have a favourable economic outlook with higher base rates, higher Gilt yields and a substantial rally in Sterling.
People’s Vote - Simply a reversal of Brexit. Although unlikely, if this was to occur one would expect a boost in business and consumer confidence leading to significant rises in Gilt Yields and I feel this would spur a rally in the Sterling against the USD to $1.45 - $1.50
No Deal – Few months ago this was considered a remote possibility but due to the lack of progress in a Brexit agreement and following the release of May’s Chequers Agreement the probability of this scenario may now be as high as 40%. A hard Brexit would favours UK markets due to the main constituents earning their income is in dollars. However policymakers anticipate this will create a negative shock in the UK economy causing unwelcome rise in inflation – reducing real income growth.
Canada + - The UK is able to set its own rules and regulations and is able to strike bilateral trade deals with other countries and envisage a comprehensive free trade agreement with the EU. There is the complicated issue of the Irish border since the EU have said under this proposal they will only consider Great Britain and not N.Ireland
Chequers – This effectively would bridge the gap between a “hard” and “soft” Brexit which would avoid the need for tariffs and border checks. In this scenario the market will anticipate reasonable economic growth with gilt yields expected to rise and see equities perform in line with global markets
Soft Brexit – The UK keeps a much closer alignment with the EU and potentially less disruptive to the UK economy. Economists would expect this to have a favourable economic outlook with higher base rates, higher Gilt yields and a substantial rally in Sterling.
People’s Vote - Simply a reversal of Brexit. Although unlikely, if this was to occur one would expect a boost in business and consumer confidence leading to significant rises in Gilt Yields and I feel this would spur a rally in the Sterling against the USD to $1.45 - $1.50
