Brexit: Expectations rising, buy GBP on breakthrough – ANZ

Brian Martin, Senior International Economist at ANZ, suggests that expectations of the EU and UK reaching a Withdrawal Agreement rose recently and ANZ has put the probability of a deal at 70%.

Key Quotes

“Expectations are that the UK may stay in a Temporary Customs Arrangement (customs union), if a trade agreement and the Northern Ireland (NI) border are not resolved by the end of the transition period (December 2020).”

“Politically, the UK cannot remain in a customs union indefinitely; nor can the EU accept a time limited UK membership, as future trade talks have not yet begun and the NI border issue is unresolved.”

“Ideally, for Prime Minister May, an agreement will be reached before the end of November, which would allow Westminster to hold a meaningful vote on it in December.”

“We expect GBP to appreciate, as an agreement would reduce immediate economic uncertainty.”

“The UK economy has held up well under the uncertainty of the past two and a half years. More recently, however, evidence that Brexit uncertainty is beginning to bite has emerged.”

“Given that uncertainty is holding back investment and hiring, there is a strong probability that an agreement would deliver a Brexit dividend.”