July 07, 2016

The UK have voted to leave the EU in a close vote, however it is not clear when the UK will officially notify the EU of its intention to leave under article 50 of the Lisbon Treaty.

From that point, the UK has two years to negotiate new trade agreements.

A shock result but not a shock reaction

Markets have reacted largely in line with expectations. The outcome was either ‘in’ or ‘out’ and in the event of ‘out’, markets opened up lower and broadly in line with where fundamentals would indicate they should be in the short term.

Currencies have also been impacted with Sterling falling significantly against the dollar (c.8%) and against the Euro (c.5%).

In turn, the Euro has also fallen against the dollar (c.3%).

Bonds have rallied as a perceived safe haven asset with German 10yr bond yields hitting a new low this morning of -0.16%. That means investors are paying the German government to mind their money.

Economic Impact

The UK is likely to feel the impact of Brexit most but market ripples will impact globally:

UK

Likely to see significant near term economic slow down

Sterling to remain weak

Interest rates may be cut

Bank of England ‘ready’ to minimize impact

Ireland

15% of exports are to the UK

C.-0.5%/1% impact on Irish growth

May benefit from business leaving UK, redirecting growth opportunities to Ireland

Europe

Growth likely to be impacted by c.-0.4%

Global

Growth impact likely to be small and less than -0.2%

Source:  Irish Life 24^th June 2016