EU cuts down UK Brexit ambitions - AmpGFX

The research team at Amplifying Global FX Capital notes that the GBP has bounced since PM May, leader of the Conservative Party, called an election on 18 April to be held on 8 June and the Conservatives are seen as winning the election convincingly, increasing their majority and strengthening the hand of PM May to conduct Brexit negotiations with less discord in UK parliament. 

Key Quotes

“Bookmakers’ odds give the Conservatives around a 90% chance of gaining an outright majority of seats and holding government. The next most likely alternative outcome is a Conservative-led minority, given around a 9% chance.”

“The polls of voting intensions show modest improvement in support for Labour since the election was called, to near 29%, but only after its support had drifted persistently lower since the Brexit vote in June last year.  The main pro-EU party, the Liberal Democrats, have seen no improvement, steady around 10%.  Conservatives are polling around 45%.”

“However, the complexity and difficulty of Brexit has not changed and news in the last week point to the challenge ahead, suggesting upside for GBP is still limited.  The EU27 showed solidarity at a summit on the weekend, and German Chancellor Merkel warned the UK about harbouring “illusions” over its desired outcomes.”

“The EU-27 set out their guidelines for Brexit negotiations at a summit on Saturday, 29 May. They insist that “sufficient progress” be made on the terms of the financial settlement (said to be a cost to the UK of up to EUR60bn), the rights of EU citizens in the UK and the future of the Irish border, before commencing negotiations on a new trade deal between the UK and the EU.  PM May has said she would much prefer negotiations on trade begin early in the process in parallel with these contentious issue of the costs of exit.”

“The EU leaders expect a trade deal to take a considerable time after the 2-year time table (ends 29 March 2019) for Brexit set out in Article 50 process for EU exit. PM May has been hoping for one in place when Brexit is complete.  Fear of a cliff edge or limited progress on trade are likely to remain high in the UK.  Slow progress on a trade deal may be used by the EU as a bargaining chip to get concessions on the price of exit.”