Brexit: What do we need to know and what's next?

A survey among 16 banks shows a 54% chance of Brexit's delay

Pound finds support at every signal that Parliament will support May

Surely Brexit sees a rather complex process for many people, not to mention investors and traders. Alas, the process has not become easier and more transparent to understand, but it continues to be tied up about political maneuvers, auditory shots, parliamentary rockets, news waves, and prosaic rhetoric. Two countries that can not understand a La Manche distance. Disinterest caused solely by the complex relationship between the internal circles of the Government and the Parliament.

And with the approach of March 29, analysts, commentators, traders and investors have been trying to find logic and meaning for Brexit for more than two years, and the effort to make it understandable is a rather difficult task.

According to a Bloomberg study, UK's chances of leaving the EU without a deal on March 29 are only 9%. It is much more likely that the exit from the Union will be delayed or the transaction will pass through Parliament. Variants that would boost pounds.

What do the numbers show? Strategists see a 54% chance of Brexit delaying and keeping the pound against the dollar at $ 1.33. May's deal to pass before the deadline - 37% and a pound rate of $ 1.38. No-deal options - as we mentioned only 9% and a pound rate of $ 1.20.

What's next on the way to Brexit?

March will be quite dynamic for UK politicians and Cable as well. What next? What are the options? Let's break down the process, look at the picture and make us clearer. The first date we need to look at is March 12th. Parliament will then vote again on Theresa May's overall proposal. Let's recall that the first vote was in January, and the majority defeated May. What to expect? If the deal is dropped, there is a possibility, supported by Corbyn, to convene a second referendum. A second referendum is seen as a positive development of events that supports the pound. The next day - March 13 - Parliament will vote on the No-deal scenario if the vote has failed in the previous day. This scenario would be negative for the pound. The consequences would be: revision of exit conditions over a period of 21 months and rewriting of rules by the World Trade Organization (WTO) to settle trade relations with the EU.

March 14: The issue of extending Point 50 will be on the agenda for voting in Parliament. When this condition is adopted, a new extension deal will follow, scheduled for the summit in Brussels on 21 and 22 March.

The better way out of the Brexit situation:

On March 12, Parliament adopts the May motion, and all the points started to run in a row, the process was proceeding normally and without complications. The last signatures are to be held at the meeting in Brussels on 21 and 22 March. March 29 - UK officially comes out of the EU with a deal and regulated trade and customs relations.

Important!

With Brexit, keep in mind that on March 29 we expect unusual and highly volatile movements at all pounds. As in the coming days, there will be rebounds in the financial markets. Unusual conditions such as low liquidity and potential downsizing, broad spreads, gaps, aggressive price movements at the Cable Crosses and related shares and the ETF with the UK. Given that the UK is also a place of active trading in commodities such as precious and industrial metals, we expect unforeseen movements in these instruments as well. The moment will also be extremely delicate due to the likelihood of increased constant media noise and potential attempts to fake news and rumors.

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Where to expect the Pound in the long-term?

GBP/USD Daily

The chart above is Societe Generale's view of the pound rate to 1-2 years as a result of how UK comes out of the European Union. The second referendum option is also included. The positive development of the events should bring the pounds back to levels again around 1.35 - 1.40 against the US dollar, while the negative scenarios will pour the pounds of a new collapse to about 1.22 - 1.20 against the dollar.

According to Carney, the chairman of the Bank of England, the country and the economy are well prepared for Brexit. But Mark Carney's main worry is Brexit's no-deal, which still has significant implications for the British economy. The Bank has taken steps to protect the financial markets, reduce the financial risk and minimize the commercial consequences. Potential economic consequences are 8% GDP decline, 30% house price collapse, 7.5% unemployment rate, and BOE inflation rate over 2%. Applying higher interest rates will not be immediate because of rising inflation.

Current levels of unemployment and change in house prices.

With EUR / GBP (EUR / Pound), according to UBS, the expectation is the price to pass over parity in the no - deal scenario.

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Source: Bloomberg Finance L.P.

Graphs: Used with permission of Bloomberg Finance L.P.

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