The Repricing of The Brexit

1 July 2016

Rates & FX Markets Strategy

The Repricing of The Brexit

Highlights

Highlights

¨                  Almost a week after the historical outcome for UK to leave the European Union, financial markets have absorbed the first round of the Brexit aftermath.

¨                  This decision has spurred a knee-jerk risk-off sentiment as global uncertainties have increased, although this volatility is subsiding as a clarification over UK’s European status will take time.

¨                  As this was not our base case, we downgrade our EM FX forecasts, albeit mildly, at circa 3%. Safe havens and majors were revised more significantly. Bond yields were upgraded given an outlook of further accommodative monetary policy.

¨                  We opine the Brexit is likely to have an economic impact that would develop over several years, hence global contagion poses a remote threat.