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.”