Euro also vulnerable to a hard Brexit - BofAML

Author: Justin Low | Category: News

The pound isn't the only one at risk of being hurt

In a note to its clients, BofAML notes that a hard Brexit would also be a shock for the Eurozone economy at a time when momentum is already slowing. The firm argues that this would present a downside case not only for the pound but for EUR/USD and EUR/JPY as well.

"If a hard Brexit triggers a recession in the weak parts of the Eurozone, such as in Italy, the economy may be affected more than markets currently expect", says the note. Adding that "if markets question the sustainability of the Eurozone again, as during the 2012 crisis, the UK may look like a safe haven again and its decision to exit the EU may be seen in a more positive light" in an argument for being slightly less bearish on the pound than on the euro.

Despite that, the firm still views that the pound could fall to as low as 1.10 against the dollar in the event of a no-deal Brexit and views that cable could rise to 1.50 if Brexit is stopped.

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