A fork in the road - Capital Economics
UK Markets

A fork in the road

UK Markets Outlook
Written by Capital Economics Economist
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The recent political chaos in Westminster means that the chances of the UK leaving the EU without a deal have risen, in our view, to about 50/50. In a no deal Brexit scenario, we would expect sterling to dip – although there are reasons to think that the fall would not be too big. Meanwhile, gilt yields would drop amid a “flight to safety” and expectations that interest rates would be cut. If, on the other hand, a Brexit deal is ratified in Parliament, then we still think that rates will rise at a faster pace than markets and most forecasters expect, paving the way for a rebound in sterling to $1.45/£ and around €1.20/£, and for a rise in the 10-year gilt yield to 2.25% by the end of 2019.