HALISTER1: The Shock Result of U.K. Vote May Dent Animal Spirits: Deutsche

The Shock Result of U.K. Vote May Dent Animal Spirits: Deutsche

(Bloomberg) -- The surprise result and political uncertainty going forward may hit investors’ confidence, ability and willingness to take risks, Deutsche Bank analyst George Saravelos writes in client note after U.K. votes to leave EU.
  • Expects GBP/USD to reach 1.15 in 2016 vs in 2017 previously; pair likely to reach 1.30 today; the BOE is likely to ease policy but the extent will depend on the FX move
    • Expects EUR/USD to reach 1.05 by year-end and 95 cents in 2017
  • The reaction of European financials and Italian bonds will be key for the broader market to assess global contagion risks and the follow through in asset prices
    • Resolute ECB, the large and unquantifiable time lags in terms of the political risks, and light positioning should mean the market is more orderly than in FX
  • NOTE: Sterling falls to lowest level since 1985, with volatility surpassing Lehman crisis levels, spurring speculation central banks will act to calm markets
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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George Saravelos (Deutsche Bank AG)

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