The UK government announced today that the PM Theresa May intends to trigger Article 50 on Wednesday 29 March, which starts the formal Brexit process.
Donald Tusk tweeted afterwards that 'within 48 hours of the UK triggering Article 50, I will present the draft No. Brexit guidelines to the EU27 Member States'.
The EU council is expected to meet 4-6 weeks later to discuss and adopt Brexit guidelines (according to EU sources it is too early to discuss the Brexit guidelines at the EU council meeting on 6-7 April).It seems likely the EU leaders will wait to meet until after the second round of the French presidential election on 7 May.
As the UK wants to control EU immigration, we are heading for a so-called 'hard Brexit' with the UK leaving the single market. Eventually we think EU and UK will reach a deal corresponding to the EU-Canada deal (possibly slightly more comprehensive given the bigger trade volume between the UK and EU).
We still see potential for further GBP weakness in the near term and after the triggering of Article 50. We target EUR/GBP at 0.88 in 1M and 0.87 in 3M but stress that the risk is skewed on the upside relative to our forecasts.
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