Canada: Will Brexit send waves across the Atlantic? – RBC

Research Team at RBC Economics, lists down the impact on Canada’s economy of the UK’s vote to “leave.”

Key Quotes

“The UK voted for “Brexit” and will likely begin official negotiations to leave the European Union in October.

Uncertainty about Single Market access is expected to result in a slowdown in the UK economy, sterling depreciation, and monetary policy stimulus from the Bank of England.

The UK is one of Canada’s top trading and investment partners, however the small relative size of these relationships points to a muted direct effect on Canada’s economy. Knock on effects could weaken the euro area and remaining EU economies with which Canada also has important trade and investment relationships.

A return to risk aversion in financial markets is expected to put downward pressure on oil prices, government bond yields, and the Canadian dollar (relative to USD). In a more severe reaction, upward pressure on peripheral spreads in the euro area risks replaying the volatility seen during the European debt crisis.

Financial market effects have the potential to exacerbate regional divergences within Canada’s economy. A pickup in uncertainty about the global economy also presents a downside risk to the outlook for the Canadian economy.

Ratification of CETA, Canada’s free trade agreement with the EU, will likely be delayed amid Brexit negotiations.”