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Analysts at Nomura suggest that the UK government has been stuck in a Brexit bind between what it can deliver in time, what is acceptable to the Conservative party and MPs and what the EU will accept.

Key Quotes

“Something has to give, and it could well be the UK’s position on the customs position.”

“Whether it will be accepted by the EU remains to be seen, but the risk is that we could see Cabinet resignations over a position they cannot support that could trigger a leadership challenge.”

“The most likely scenario is that the government manages to carry on and attempts a political compromise, but the tail risks and political noise will likely continue until the EU finds common ground over the UK’s new position.”

“If a political solution is found this could see rate pricing for an August hike supported, but there are still key data such as GDP, employment, CPI, retail sales and PMIs along the way.”