GBP: Changing Base Case To No-Deal Brexit; UK To Enter A Recession & BoE To Cut 50bp In 2020 – Barclays

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UK PM Boris Johnson received warm welcomes from German Chancellor Angela Merkel and French President Emmanual Macron. However, reaching a deal is not that easy.

Here is their view, courtesy of eFXdata:

Barclays Research discusses its new base case for Brexit.

“In the light of recent political developments, particularly the policy statements of the new administration – since Boris Johnson was voted in as the new leader of the Conservative Party and therefore the prime minister – we change our central working assumption from expecting the agreement of a withdrawal deal by the end of the year, to the UK departing the EU without a deal, either on 31 October, or shortly thereafter, if, for example a snap election has been called that delays the current 31 October deadline. In contrast to Theresa May’s administration, we believe that the government is committed to no-deal if necessary, and possibly has greater room to deliver it,” Barclays argues.

We consequently expect the country to enter a shallow recession in 2020 and the Bank of England to cut rates by 50bp by mid-2020, despite some initial jump in inflation on the back of the attendant currency depreciation. The government would also likely bring forward an emergency budget containing new spending measures that would help mitigate some of the negative impact on growth. We believe the risks to our forecasts are tilted to the downside: a deeper recession could take hold should the expected disruption and confidence effects of a no-deal outturn be larger than expected,” Barclays adds.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.