UK: Seems we are heading toward a “hard Brexit” - Danske

According to analysts from Danske Bank, the pound could weaken in the currency market as markets begin to price in political uncertainty. 

Key Quotes:

“In connection with the Queen's next speech, May will introduce a Great Repeal Act to remove the European Communities Act from 1972 (stating that EU laws have primacy over UK laws). The new act will convert all existing EU laws into UK laws when the UK officially leaves the EU. The idea is that this should reduce uncertainty and that the UK can remove or change laws afterwards. The act will also end the jurisdiction of the EU court.”

“It seems as if we are heading for a 'hard Brexit', as Theresa May revealed that control of immigration is the most important issue. She said that the UK is 'not leaving the EU only to give up control of immigration again'. Interpreted literally, this implies the UK leaving the single market, as EU leaders have said that access to the single market means that the UK has to accept free movement of labour.”

“This is likely to imply that UK financial institutions would lose the current passport access to the European internal market for financial services.”

“The terms on which the UK withdraws from the EU will mitigate capital inflows to the country via the very large current account deficit. This could dominate the positive effect of the recent better-than-expected economic data, which could challenge market expectations of another  Bank of England rate cut.”