No deal odds up
The median forecast for a disorderly Brexit, aka 'No-Deal Brexit', jumped in an August 2-7 Reuters Poll of economists to 35% up from 30% given in July and the highest since Reuters began asking this question two years ago. The range of forecasts in this poll was high as it went from 15% to 75%. Given the complexity and fast moving nature of the procedural process I am not surprised to see such a wide range of odds. A no-deal Brexit , where Briatin leaves and trades under the WTO, was seen as the second most probable outcome.
The most popular view of the economists in the Reuters poll was that the UK and the EU will eventually settle on a free trade deal. Readers will know that my view is a hybrid betwen these approaches and that I think there will be a 'deal after a no-deal Brexit'. So, my view is that the median odds of a no-deal Brexit are underpriced across the GBP and that the GBP has more to fall if that approach plays out.
The third most likely outcome was Briatin staying a member of the European Economic Area, paying into the EU budget to maintain access to the Single Market yet having no say over policy.
The fourth most likely outcome was for Britain to cancel Brexit.
Recession chances
The median chances of the UK falling into recession was seen at 35-40% for the next two years. In terms of rate cuts only 12 of 55 economists polled expected a BoE rate cut this year or next. You can read the full Reuters piece here and we can expect sellers on GBP rallies for the medium term
