The Brexit event on 12 of April will impose a meaningful impact on UK financial markets after the UK Parliament rejected all four alternatives: customs union, common market 2.0, referendum on Brexit deal and even emergency brake on no deal. Parliament rejected a proposal to stay in the EU’s trading arrangement , known as the customs union, by just three votes. It could potentially be voted on again today.
The period of Brexit uncertainty is continuing and we are helping our clients to understand the source and implications of it. Goldman Sachs views such uncertainty as an opportunity to gain on sterling pound volatility, as well as a number of Swiss-based funds share the same vision. The “neverending story” is becoming much of the reality and the second most probable scenario is a no-deal/hard Brexit.
Brexit is not a global event. Therefore markets not connected to the UK will hardly move in response. FTSE 350 companies make just 25-30% of their revenue in the UK. Zero global markets response to brexit event is also confirmed by behaviour of the European stocks. These don’t seem to care about all the UK news flow. It also seems like sterling pound is already priced for a hard Brexit scenario, and by all means is very undervalued against the euro. So any softening of the situation will probably lead to a stronger pound.
