The road to Brexit: currency markets take fright
October 19, 2016
HSBC have recently published an economic commentary covering the topic of Brexit, discussing political updates and the state of the market and industry.
Covering topics such as:
- Transitional arrangements may be needed
- Structural weaknesses in the UK economy
- Getting under the skin of consumers
A brief section of the article can be seen below, and the full article can be viewed here...
14 October 2016
Since the start of October some outlines of the Brexit process have started to emerge. It is of course still far too early to guess at the details of the final outcome, but following recent speeches by Theresa May some business lobbying organisations have reacted negatively, while on the currency markets the pound has weakened further.
Mrs May delivered two speeches to the Conservative Party Conference, which took place in Birmingham between 2nd and 5th October. Her remarks on the subject of Brexit were carefully crafted, aiming to please the Tory faithful in the hall while at the same time also being careful not to tie the Government’s hands in the upcoming negotiations. Apart from saying that Article 50 of the Lisbon Treaty will be triggered in the first quarter of next year, little that she said was more than statements of the obvious, particularly in respect of the so-called Great Repeal Bill. Nonetheless, her comments about freeing the UK from the jurisdiction of the European Court of Justice, and on the subject of immigration, were interpreted by the media and by financial markets as a signal that the Government is leaning towards a ‘hard’ exit, where retaining (or reclaiming) the maximum degree of national sovereignty and controlling immigration is deemed more important than being in the single market.
Only time will tell whether this is a correct interpretation, and some media reports suggest that the issues are still being hotly debated within Government. In essence what needs to happen is for the Government to decide what the end point of the process should be: setting out how it believes the relationship between the UK and the EU will look in 10-20 years’ time. Once that is known, it can then start to think about how to get there.