Brexit View from Belgium BY ART HILL
I am deviating from the technical analysis for a take on Brexit. This is just a personal observation so take it with a grain of salt. For those that do not know, I lived in London for four years and now live in Belgium (12 years now). Nobody really knows how Brexit will play out, but I doubt that there will be a full Brexit. As far as the financial markets are concerned, this is not a credit event (Lehman) and it is not even on par with the European sovereign debt crisis in 2011.
At this stage, I consider this a political event and we have yet to see the final result of the non-binding referendum. The resignation of David Cameron was actually quite shrewd because it bought time. The Conservative Party must now choose a new Prime Minister and this will take a few months (perhaps October). A formal decision to leave, therefore, could be taken in October at the very earliest. On the price chart, notice that the FTSE Index ($FTSE) is back near Friday's close already and back above the 6000 level.
Here is the current situation. Leave won the non-binding referendum. The House of Commons, however, has yet to pass a motion to leave the EU and the vast majority of MP's support remaining in the EU. The Prime Minister resigned and no longer has the authority to activate article 50 (formal request to leave). The Labour party is in disarray with a confidence vote on deck. The only thing that is clear is that the UK is in no position to make a formal decision to leave the EU at this time.
A lot can happen in the coming three to six months and the realities of leaving the EU are hitting home. The UK needs access to the European market and the EU needs the UK. Right now EU and UK leaders are just jawboning and nothing is really happening. Welcome to EU politics. This is going to drag out because both sides are hunkering down for future negotiations. Go back and review the Greek debt negotiations for a primer on EU deal making. The ball is in UK hands and the UK can wait as long as it wants before triggering article 50.
Again, nobody knows exactly how this will play out, but I do not think the UK will leave the EU completely. We could see a new referendum that would have more details and be binding. We could see new elections in the UK with politicians from both camps going head-to-head. This would be a de-facto second referendum. We could see long and drawn out negotiations on the future of the UK in the EU.
AI
