In view of analysts at Danske Bank, the most likely outcome is a ‘decent Brexit’, which is soft in the sense that the UK stays close to the EU but hard in the sense that the UK is leaving the single market.
Key Quotes
“The Irish border remains the most difficult issue.”
“The likelihood of a ‘no-deal’ Brexit has increased. While there are most likely enough hard Brexiteers to trigger a leadership contest, it is more difficult for them to win it.”
“The deal is likely to include a legally binding withdrawal agreement and a political declaration on what the future relationship beyond the transition period should look like.”
“The likelihood of a general election or a second referendum before 29 March is low. A soft Brexit keeping the UK in the single market also seems unlikely.”
“Brexit remains the key driver for the GBP and uncertainty related to the outcome is likely to keep the GBP volatile and undervalued in the coming months. We expect EUR/GBP to break substantially lower when markets can start to price out a ‘no-deal’ Brexit risk premium. We forecast 0.84 in 6M and 0.83 in 12M.”
“In case of a ‘no-deal’ Brexit, we expect EUR/GBP to spike higher and a test of 1.00 should not be ruled out.”
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