New research from State Street Global Advisors Senior Investment Strategies Raf Choudhury suggests The Bank of England may take the opportunity to hike rates earlier than expected given the loose fiscal policy recently announced and tighter labour market pushing up inflation.
Conversely, a no deal in October 2019 could have a negative impact on the growth outlook and would likely lead to a cut.
“With trade deals stalling it’s easy to forget about Brexit. However, Europe needs careful consideration and due attention. While there are signs of Eurozone stabilisation, political uncertainty, especially around Brexit, persists,” said Mr Choudhury
The Eurozone has given the UK a flexible Brexit extension until the 31st of October with the UK able to leave on the 1st of any month, on the basis that the UK will participate in the May 23rd EU election. If they fail to participate in this election, the EU will demand the UK leaves on 1st of June.
Economically this is good for investors according to Raf Choudhury because it means there’s no immediate cliffhangers. Although he notes, that growth will likely be hit by Brexit uncertainty and will stay below trend in the immediate term.
How other key markets are responding
According to Raf Choudhury April saw global markets deliver positive returns. Global markets again posted positive returns as risky assets continued to benefit from an optimistic environment with a dovish US Federal Reserve and improving views on global fundamentals.
In Australia the S&P/ ASX 200 Index was up 2.4 per cent for the month of April and is now up 13.5 per cent on the year to date.
Local based fixed income returns saw positive returns again in April with Australian government bonds up for a month after negative yields in shorter tenors.
The US also posted positive returns in April with the market up 4 per cent for the month and 18.3 per cent for the year.
Europe was up 4.1 per cent and Japan was up 2.1 per cent for the month of April respectively for each market.