- The Brexit vote looks to cause significant economic damage to the UK economy.
- The key risks to NZ are weaker global growth, weaker global commodity prices and increased bank funding costs.
- We now have renewed confidence in the RBNZ cutting the OCR to 1.75% by year end.
The vote in favour of the UK leaving the EU (52% to 48%) took financial markets by surprise. As the polls closed on Friday morning NZT, market sentiment had been relatively upbeat. As the realisation grew that Britain had voted to leave the EU, financial markets came under heavy pressure, resulting in unprecedented declines in the GBP and broad-based declines in global equities. There remain many unknowns and the debate about the implications for economies and financial markets are just beginning.