Brexit impact: Sterling is posting fresh lows, and is showing over a 2.5% decline versus the dollar and a 3% loss to the yen, UK stocks are taking another hammering, with the FTSE 250 down 3.6% (versus the 0.9% decline of the multinational-laden FTSE 100), and the 10-year Gilt yield has fallen below 1% for the first time ever, despite Moody’s cutting its outlook of UK sovereign debt to negative due to what it thinks as being a “prolonged period of uncertainty” that lies ahead. This comes with the French foreign minister saying that there would be no automatic Swiss-like bespoke trade deal (unlike Norway and Iceland, which are members of the EEA, entailing acceptance of free movement and payment of EU fees).
EU-UK Divorce Proceedings still a way off: The U.K. may have voted to leave the EU, but while EU Officials are pressing for a quick start of exit negotiations, there doesn’t seem to be in a sense of urgency in the U.K.. Germany ruled out informal negotiations, and indeed, while EU officials are giving up hope that the exit process will be formally launched at a summit this week, they are indicating that the U.K. needs to trigger article 50 and that there won’t be informal talks. David Cameron is expected to explain the U.K’s position at a dinner tomorrow, but with Cameron himself stepping down later in the year, it is not even clear who will lead the exit talks. The Brexiteers may have won the referendum, but there doesn’t seem a strategy in place what to do next and whether Cameron’s successor will want the U.K. to stay in the single market, which would also leave the EU’s freedom of movement rules untouched, or press ahead with a total break, which was the policy of the official leave campaign. As long as this is unknown, informal talks seem unlikely. So the referendum is out of the way, but uncertainty about the U.K.’s future relationship with the EU remains open.
UK banks are leading the stock market declines; RBS and Barclays fall 14.5% and 11% respectively, cable is trading below 1.3200 and EURGBP has traded as high as 0.8340. A real manic Monday following Thursday nights Brexit decision, uncertainty continues to dominate.
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