What to expect in UK Markets when May pulls Brexit trigger - BBG

Bloomberg offers insights on the potential impact of the UK PM May’s Article 50 trigger on the UK markets.

Recall that the UK's Brexit Minister Davis has called on lawmakers to vote to drop amendments that were added to the Brexit bill, hinting that the Article 50 trigger could be as soon as tomorrow.

Key Highlights:

There is no consensus on what it means for markets

Some analysts are warning markets are too complacent in expecting a smooth path toward an agreement

“We reject the notion that sterling has fully priced Article 50 and beyond. Risks to the currency remain to the downside on a disruptive start to negotiations,” Strategists at BAML noted.

The key question is whether economics or populist politics dominate the negotiations – BAML

BAML further expects a rising risk premium for holding gilts as a result of political headlines early on in the negotiations, and recommends being short five-year gilts versus overnight indexed swaps. 

Strategist at ING noted that traders will focus on what the process means for the financial services industry, a key contributor to the economy, and any signs that banking or broader investment is being relocated out of the U.K. could potentially have a negative effect on the currency, Bloomberg reports.