“First you exit, and then you negotiate the new relationship, whatever that is,” said European Trade Commissioner Cecilia Malmstrom to BBC on Thursday.
The future of trade between United Kingdom and the European Union will be unclear until Britain has formally left. Article 50 of the Lisbon Treaty will have to be triggered by the Prime Minister for a two-year-long “divorce process” to begin.
Theresa May, who has so far won the support of more parliamentary colleagues than the other candidates, has ruled out the possibility of triggering article 50 until the British government has an economic strategy. This makes a political disentanglement only possible in 2018 after which a new trade deal can be struck. After Brexit and before a new trade deal, the E.U. and U.K. will trade according to WTO rules.
The Governor of Bank of England Mark Carney’s comments about the government being ready to step in with more stimulus and a cut in interest rates to steady the economy drove the pound value down. It also boosted the British stocks. FTSE 100 yesterday closed at a 10-month high and 3% higher than before the Brexit. FTSE 250 that represents companies more exposed to UK economy is still down.The National Farmers Union (NFU) held a meeting to discuss the aftermath of leaving the European Union. According to official statistics, 63% of U.K. farm exports go to the E.U..
Here's how the European markets stood at 8:30 am:
UK FTSE 100 - up 1.01%
Germany DAX - up 0.92%
France CAC 40 - up 0.94%
Spain IBEX - up 1.41%
Asian markets also responded positively to the BOE announcement. Australian shares had their strongest weekly advance since mid-April.
Japan Nikkei - up 0.68%
Hong Kong Hang Seng - closed for holiday
China Shanghai Composite - down 0.10%
Australia S&P/ASX - 0.25%
U.S. Futures are flat. Oil prices have dropped further following news that violence in Nigeria has died down. According to a Reuters survey, OPEC countries delivered record supplies in June. U.S. auto sales and manufacturing numbers are out today.