60 pct odds of a UK recession within the next 12 months, says TDS

UK economy enters a period of huge uncertainty and weakness as a result of UK's vote to leave the EU. Pound bashed to multi-year lows against majors and follow-through selling likely to continue as markets digest the enormity of today’s decision. Despite the 9.8% fall in GBP/USD that we have seen overnight, there is a grave danger of further weakness in the weeks ahead.

In the coming months, British and European leaders will begin negotiating the terms of Britain's departure. The EU has to be notified of its withdrawal and once Britain invokes Article 50, it will have a two-year window in which to negotiate a new treaty to replace the terms of EU membership.

Uncertainty about Britain’s future relationship with the EU, its largest trading partner, could push the UK into a recession in the short run. The EU may decide to strike a hard bargain to discourage other countries from leaving the EU.

"We see the odds of a UK recession within the next 12 months as now 60%. We pencil in year-end targets for GBPUSD of 1.20 and 0.50% lows in 10y gilts,” said TDS in a report.