Brexit: what's next for the markets?
Beyond a commitment to trigger article 50 in March, there was little evidence of a plan after the UK’s vote to leave the European Union last year.
But Theresa May’s January press conference brought with it greater clarity, laying out twelve objectives for the impending negotiations. Most notable among these surrounded subjects that have been at the forefront of the debate for months: her insistence on stricter immigration laws, and, crucially, her decision to surrender the single market.
Questions remain about what they might mean in the long term, but for now the prime minister’s speech was enough to reassure the markets – giving sterling in particular a shot in the arm. Clearly there were reasons for traders to be optimistic: the promise of new global trading partners, a parliamentary vote on the final deal, and the pursuit of a ‘phased transition’ which could offer stability that has otherwise been absent.
Still, ongoing uncertainty is bound to keep markets on edge. Many of May’s plans were quickly written off as idealistic or unfeasible, and her reluctance to provide details (in order to best protect Britain’s interests, she said) has left a lot of gaps to be filled. The article 50 bill may have passed through parliament with an overwhelming majority of 384 votes, but official permission to begin talks doesn’t mean negotiations have started to look any less complex and changeable than before. Plus, they can only come to an end if parliament is happy further down the line, too: given the Supreme Court’s ruling in late January, MPs have final say over any deal settled on by the government.
With so many factors and parties in play, it may take some time for the consequences of Brexit to fully become clear. And while May has insisted that ‘no deal for Britain is better than a bad deal for Britain’, markets may well not share her confidence.
Markets to watch
Sterling will no doubt be at the centre of the conversation, so keep an eye on major pairs like GBP/USD and EUR/GBP. Bear in mind, of course, that Trumponomics will take centre stage as far as the dollar is concerned for the next few months. Given its largely international focus, currency movements will also have a major influence on the FTSE 100. It fell in the immediate aftermath of May’s speech, for example, as the boost in the pound knocked UK companies’ overseas earnings.
Meanwhile, the news that Goldman Sachs, HSBC and UBS intend to move operations from London could be a sign of things to come. Expect a number of listed companies to make similar decisions that could have a major impact on their share prices.