Brexit referendum: One month to go – Deutsche Bank

Research Team at Deutsche Bank, suggests that the June 23rd Brexit referendum is fast approaching and with just one month to go, the outcome remains too close to call as polls remain tight, and in any case have been poor predictors of recent UK elections.

Key Quotes

“The referendum could have profound implications on the future of both the UK and the EU. In case of an Out result, the priority will be to negotiate the new UK-EU relationship terms. There are many reasons why this could take longer than the 2 years envisaged in the EU Treaty. During the negotiations, the EU would have to strike a difficult balance between preserving links with the UK and discouraging others from following the UK.

The implications of Brexit for the UK and EU economies are difficult to assess, beyond the fact that heightened uncertainty during the negotiation period would weigh on growth in both regions.

Markets are pricing Brexit risk to varying degrees. As such, a modest relief rally is likely in the case of a Remain result, with a risk sell-off in case of Leave. Brexit could mean a weaker pound, steeper gilt curves and lower UK equities. As for EU assets, Brexit would likely mean lower core long-rates with periphery underperforming, initially weaker euro and lower equities. The long-term impact is difficult to predict.”