Brexit Aftermath: UK to enter a brief and shallow recession - TDS

Research Team at TDS, expects the UK to enter a brief and shallow recession as heightened uncertainty from the Leave referendum win weighs on both household and firm demand.

Key Quotes

“While the exchange rate will help offset some of this weakness via exports, its boost will be limited.

Inflation will jump to over 3% y/y by mid-2017, but the Bank of England will turn a blind eye to this as it focuses on medium-term price pressures.

We expect the Bank of England to cut Bank Rate by 50bps in August and introduce an initial £75bn round of QE at its November meeting, with more possible later.

We highlight some of the key high-frequency indicators to watch from here, including the Bank of England’s Agents Survey and the Markit/KPMG employee demand measure.

UK rates strategy: We like owning Sept 16 Short Sterling contracts at 99.57, target 99.82, stop loss 99.44. (Size 1000 contracts).”