Financial markets will be left in the dark if the UK makes a cliff-edge exit from the EU

Currency markets are taking the possibility of a no-deal Brexit seriously. The pound, at $1.28 against the US dollar and €1.11 versus the euro, is at its lowest level for almost a year and we shouldn’t be surprised. Even Brexiters who imagine sunny uplands in the long term usually concede that a no-deal Brexit would mean a thump for the UK economy on the way out.

But there is a crucial short-term question about a “no deal” outcome. How literally should it be interpreted? If it were to mean nothing whatsoever being agreed about the continuity of financial contracts on day one of Brexit, that’s alarming. There would be a real risk of mayhem in the markets.

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