Presently, the range of potential outcomes include: a May resignation, a vote of no confidence in the government, a general election, a second referendum on EU membership, a temporary stop on Britain’s withdrawal, or possibly even some sort of combination of all the above.
“If anything, the events of the past two weeks suggest the distribution looks much more uniform,” strategists at Nomura said in a research report published this week.
“In other words, high levels of uncertainty make all potential outcomes equally likely, including the tail risks of ‘no deal’ on the one hand, but remaining in the EU as the other.”
Sterling has fallen around 11 percent against the U.S. dollar since reaching a peak of $1.4335 in April 2018, in part due to rising fears over the course of the Brexit process. The U.K. currency was trading at around $1.2760 Friday morning.
“We would expect a globally coordinated central bank response to a global financial market meltdown upon a hard Brexit, such as liquidity support through forex swap arrangements and possible forex intervention,” strategists at Nomura said, when looking at the risk of contagion in financial markets.
“But, we would stress that it may not be needed if: a) we do not witness a financial meltdown or b) no deal Brexit planning finds much needed efforts towards the final few weeks before Brexit day.”
— CNBC’s David Reid contributed to this report.