The UK parliament has cleared the bill for Article 50. It is expected that PM Theresa May will officially begin Brexit negotiations with the EU by March end.
What this means:
1) The legalities
Despite gaining a 2-year timeline following the trigger, the actual time frame to complete the negotiations would be shorter, given that some time will have to be allocated to parliamentary approvals. Though the way the actual negotiations pan out remains uncertain in absence of precedents, a tug of war is expected, with the UK trying to gain greatest possible access to the EU market while regaining control of its borders and the EU resisting granting special favours to the UK lest it undermines EU’s unity.Upcoming political events like the French elections could also impact negotiations
2) The pound
GBP has lost ~16% vs the USD since last year’s referendum. Though GBP declined on news of bill approval, it is expected that the event is mostly priced in and the actual trigger could be a non-event. But downside risks remain – from the US rate hikes and unexpected negotiation disruptions.
3) The markets
FTSE100 has rallied 16% since the referendum. But most of this resilience was due to a weak pound translating into profits for companies with international earnings primarily comprising the index. Going forward, markets could be volatile as they follow the ups/downs of negotiations. Further, businesses might have to court uncertainty for a longer period, as negotiations focus more on transition than striking a trade deal.
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