(10 October 2019 ) DAILY MARKET BRIEF 2:UK Economy Brexit: Tempers Rise As Time Is Running Out - Market News - 10 October 2019


A row has erupted between Brussels and London over the interpretation of a leaked phone call
between Angela Merkel and Boris Johnson on Tuesday morning which a No 10 source described as
“challenging” given the German chancellor’s insistence to hold Northern Ireland for an
indefinite time in the customs union.

“Hopes for the UK and the EU reaching a Brexit deal this month were already low, but they seem to have
been dealt a further blow as reports emerged from Downing Street that the talks were on the
verge of collapse,” says UK economist Dean Turner. In the eyes of the EU, UK PM Boris Johnson’s
proposals for an alternative to the Irish backstop do not go far enough. From Johnson’s
perspective, the latest concessions are at the limit of what is politically feasible, he
says.

Separately, The Times reports of a rebellion within Johnson’s party ranks, with five cabinet
ministers and “a very large number” of Conservative parliamentarians potentially set to
resign if it comes to a no-deal Brexit.

Sterling weakness in recent sessions hints that market fears about a no-deal Brexit are rising
again, but CIO believes this is unjustified. “In our view, a deal this side of the October 31
deadline was unlikely, so the latest developments have changed little. An extension and an
election remain the likely path, which should give the pound some scope to recover,” Turner
says.

Predicting the ultimate outcome of Brexit remains difficult. As a result, the longer term
risk-return outlook for UK equities looks uncertain. But given its belief that a disorderly
exit on 31 October is unlikely, CIO still sees upside for the pound and are overweight it
versus the US dollar in its FX strategy.++

By UBS



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(10 October 2019 ) DAILY MARKET BRIEF 2:UK Economy Brexit: Tempers Rise As Time Is Running Out - Market News - 10 October 2019
(10 October 2019 ) DAILY MARKET BRIEF 2:UK Economy Brexit: Tempers Rise As Time Is Running Out - Market News - 10 October 2019
(10 October 2019 ) DAILY MARKET BRIEF 2:UK Economy Brexit: Tempers Rise As Time Is Running Out - Market News - 10 October 2019
(10 October 2019 ) DAILY MARKET BRIEF 2:UK Economy Brexit: Tempers Rise As Time Is Running Out - Market News - 10 October 2019
(10 October 2019 ) DAILY MARKET BRIEF 2:UK Economy Brexit: Tempers Rise As Time Is Running Out - Market News - 10 October 2019

(10 October 2019 ) DAILY MARKET BRIEF 2:UK Economy Brexit: Tempers Rise As Time Is Running Out - Market News - 10 October 2019

(10 October 2019 ) DAILY MARKET BRIEF 2:UK Economy Brexit: Tempers Rise As Time Is Running Out - Market News - 10 October 2019