Mizuho Bank analysts suggest that their base case is that the UK will be forced to take part in EU elections and that by 12 April the UK will have come up with a plan of action persuasive enough to allow the EU to permit a longer extension.
Key Quotes
“The risks of a change of leader or a general election remain high.”
“We expect GBP will firm later in the year as Brexit clarity emerges and BoE comes back into play. Domestic data last week, including labour & retail sales suggested activity is not falling off the edge off a cliff, despite uncertainty govern is creating for business.”
“Unsurprisingly, BoE left policy unchanged on 21 March, noting that activity had evolved broadly in line with its expectations in Feb. It is likely that next BoE forecast round on 2 May remains subject to elevated levels of Brexit uncertainty.”
“The first set of forecasts after the clouds of uncertainty have lifted are likely to be in August or possibly even November. Until then the BoE will likely hold off from making any policy changes, especially given the softer global growth outlook.”
“That said we agree with the Bank that gradual, limited tightening is probably needed should our core scenario play out.”
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