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The Day After

30 March 2017 by lberuti

Since the UK decided to leave the EU in June last year, the British economy has been in a pre-Brexit sweet spot, especially regarding export. The pound has fallen but trading rules are as yet unchanged. While most forecasts were predicting an economic impact even before the UK’s actual exit, they have proved so far too pessimistic, despite the obvious uncertainty. A layer of uncertainty was removed yesterday though, as Article 50 was finally triggered by PM May, launching officially the 2-year exit period for Great Britain to leave the EU. Clashes should materialise in the very near future, with Mrs May calling for the discussion of future partnership with the EU alongside the terms of exit, while Mr Tusk said the EU will focus solely on an orderly withdrawal to begin with. Investors brushed these concerns away, and decided to focus on upwardly revised US fourth quarter growth numbers. Credit markets were very well behaved today again (iTraxx Main -0.25bps @ 74.5bps, iTraxx Crossover -1.5bps @ 290.5bps, CDX IG -0.75bps @ 67bps and CDX HY -4.5bps @ 339bps), and the day after looked very much like the day before.