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With so many reports, news and rumors surrounding Brexit, it’s becoming difficult to stay up to date. The terms “hard Brexit”, “second referendum” and “elections” are enough to serve as clickbait, but what exactly is going on and when? Well, take a deep breath and have no fear – Vestle is here to put things in order. Here are 5 things you need to know about Brexit.

Brexit will take place in October. Maybe.

Following the UK referendum that was held on June 23rd, 2016 Article 50 of the Treaty on European Union was invoked. This launched the two-year divorce process which was due to end on March 29th, 2019. Wait, what? That’s right: The due date is long gone and – sadly - time machines have not yet been invented. So, what happened? Simply put, the “final date” turned out not to be so final. It was extended to October 31st, 2019, which is the final, final date. For now, anyway.

A hard Brexit is not off the table

What are the chances of a hard Brexit actually taking place? This is a complex question and depends mainly on the person leading UK’s divorce negotiations with the EU. Currently, the UK wants more than the EU is willing to give and the internal instability in the UK is not helping one bit. Throw in the pressures from certain EU members who feel that Britain made its own bed and should now lie in it, and what you have is plenty of uncertainty. Currently, no one knows what type of a Brexit we’ll end up with, but as the negotiations progress, the picture should become clearer. 

Even if the UK doesn’t pay its debt, it might not be in default

As you probably know, leaving the EU is not just about formalities and a few papers to sign. It’s also expected to be an expensive ordeal. The original Brexit plan included a whopping £39 million payment to the European Union. What happens if Britain stiffs the union? Well, no one is completely sure, since this is the first time in history a country leaves the EU, but three separate credit ratings agencies all state that withholding the promised cash would not necessarily mean the UK will be in default.** Moody's, Fitch and Standard & Poor's all stated that non-payment would simply result in downgrades. On the other hand, several lawyers claim that refusing to pay would definitely result in serious legal battles**. 

BOE may not wait for Brexit to hike rates

If you thought that the Bank of England is stuck in the same hiatus as the politicians, think again. According to policy maker Michael Saunders, who is a hawkish member of the central bank’s Monetary Policy Committee, the BoE doesn’t need to wait for the political uncertainty to be resolved before hiking interest rates.* During the central bank’s last Inflation Report, Governor Mark Carney clearly stated that the BoE is ready to hike interest rates – even by more than was predicted - if the UK completes Brexit smoothly and successfully.*

Brexit means both risks and opportunities

While Central Banks favor stability, for traders the uncertainty surrounding the market is not all bad news. Uncertainty can result in volatility, which means both risks and opportunities for informed traders. Some instruments are likely to be negatively affected by Brexit, but others will benefit and CFD traders, for example, can choose to short or long their position on the Vestle trading platform, potentially trading even when markets are falling. Currently, no one knows exactly how Brexit will end, but there is plenty of accessible information and traders can use it to plan their strategy and manage risks. 

The materials contained on this document have been created in cooperation with Vestle and should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 86.9% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Full disclaimer: https://www.vestle.com/legal/analysis-disclaimer.html



5 Things you Need to Know about Brexit
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