Blackjack Says Brexit Will Push UK into Recession

Britain will fall into recession over the coming year and growth in each of the next five years will be at least 0.5 percentage points lower as a result of Britain leaving the European Union, BlackRock said on Tuesday.

“Our base case is we will have a recession,” Richard Turnill, chief investment strategist at the world’s largest asset manager, told reporters at the firm’s investment outlook briefing.

“There’s likely to be a significant reduction of investment in the UK,” he said, adding that Brexit will ensure political and economic uncertainty remains high.

Turnill and his colleagues expect the Bank of England to cut interest rates to zero this week from the current all-time low of 0.5 percent, and expand its quantitative easing bond-buying program next month.

“The market is not entirely priced for that yet,” said Scott Thiel, BlackRock’s deputy CIO and head of global bonds. This means sterling will fall further, although not as low as parity against the dollar unless in “extreme circumstances”.

The BoE will resume buying gilts before dipping its toes back into the corporate bond market, Thiel said, noting the European Central Bank’s success in narrowing corporate bond spreads through its bond purchases in that market.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza