Hello traders, on today’s agenda we have again the Brexit. ING analysts warn that the Brits are already starting the countdown on Article 50, which is the first item on Prime Minister Theresa May’s docket the end of this month. Brexit negotiations will be starting soon and they’re not going to be smooth at all.
Disagreements over the negotiation process are already looming, with the EU wanting this ‘divorce’ finally done while the UK requires parallel discussions. As part of this severance programme, the EU claims a severance payment of no less than €60bn from the British, which of course, outraged the press and the public opinion in the country.
The upcoming European elections will bring about ever-tensed and challenging discussions. The sentiment prevailing across the UK that the emergence of anti-establishment/anti-EU parties in several member states means the EU want to leave the impression of an ever-painful separation. The EU definitely needs to impede others from following UK’s example. In short, there’s a clash between Brexits and Nexits like Geert Wilders whose chances of gaining power in the Netherlands are rather low, while Marine Le Pen is extremely likely to win the race for the Presidential chair in France. In Italy the situation is even more wearisome, with two in three parties that lead the opinion polls being anti-EU.
Analysts point out the need of “a positive Brexit deal” for both parties involved. 44% of UK exports head to the EU, which in turn, “generates jobs, incomes and tax revenues”. The movement is reciprocated, with more than half of UK’s imports coming from the EU. Therefore, any trade ’embargo’ will trigger higher prices for British consumers and businesses. In turn, the UK is a huge market for the EU.
Politics will continue to remain the main driver of the economics, at least in the early stages of the negotiation process. This creates uncertainty for business. UK surveys suggest that there’s already that businesses are cautious about their investments. Should discussions around the oval table turn out badly for the UK, business will be driven away from the country and steadily the Sterling will start falling.
However, at this point in time at least, foreign businesses do not exclude the British isles from their investment decisions considering the stable economy of the country. But what lies ahead yet remains to be seen, especially now with the Scottish demanding a referendum for independence. Is Europe to experience another recession due to political uncertainty combined with economic dislocation?
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Source: FX Street