UK: Fear Moves from Brexit to the Economy - Danske
According to analysts from Danske Bank, fears about the exit of the
United Kingdom of the European Union eased during the last days, but
uncertainties hit the economy.
Key Quotes:
“The
first estimate of Q1 GDP growth showed that growth slowed to 0.4% q/q.
Slower growth and falling employment indicate Brexit uncertainties have
hit the economy. According to the OECD a Brexit would result in UK GDP
being 3% lower by 2020.”
“In the financial markets Brexit fears
appear to have eased further this week. In the FX market GBP gained
further versus USD, while implied GBP volatility has fallen sharply. The
market’s pricing of the Bank of England is little changed this week,
implying around 20% probability of a 25bp Bank rate cut within the
coming 12 months.”
“Opinion polls released this week have been
more mixed. According to odds from Betfair the probability of a ‘Brexit’
is still 28% while Matt Singh (a political blogger who was one of the
few who correctly predicted the outcome of last year’s UK general
election) has assigned a 21% probability of a ‘Brexit’.
“Markets are likely to stay sensitive to comments, reports and opinion polls.”
