Britain preparing for the possibility of ‘no-deal’ Brexit
UK Prime Minister, Theresa May, is preparing for a meeting with her cabinet ministers next month in order to discuss the preparation of United Kingdom in case of a no-deal Brexit according to Bloomberg. As the markets have increased their bets on Britain leaving the EU without a deal, the pound has hit the 2018 low on Wednesday against the euro, yen and Swiss franc; while London based traders have reported a noteworthy surge in investors hedging against a possible fall in the pound in case that the UK does not reach a deal, which would cause significant damage to the UK’s economy as the trade barriers would rise against the UK’s biggest export market.
The negotiations between the UK and the EU see as the major obstacle the proposal of Theresa May for a new free trade area crossing the UK and the EU, as well as the issue of avoiding hard land border between Northern Ireland and the Irish Republic. In September, British Prime Minister will attend the Salzburg summit where a possible Brexit confrontation may be expected, followed by the EU summit in October where the aim will be for the Brexit deal to be signed off and having the EU and UK parliaments to vote on the Brexit deal towards the end of this year or beginning of 2019. Finally, in March 29th 2019 UK will leave the EU.
The transition deal (if agreed) would allow current passporting to continue after Brexit, thus banks, insurers and asset managers in Britain would be able to continue having access to the EU customers as they have at the moment. The passporting should continue until the end of 2020 and then a new trade agreement that would cover all economic sectors will need to be agreed upon.
Wednesday was another quiet day regarding the macro-economic news releases, where the news coming from Canada was a surprise as building permits plunged to -2.3%, as opposed to the expected -0.1%. The reason for decline is seen in the lower intention of construction for residential buildings, where the residential sector municipalities issued $5.2 billion worth of permits in June, which is 5.7 percent lower than in May, while the multi-family house permits dropped 8%. The reason for decline is seen in the lower intention of construction for residential buildings.
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