Brexit: exactly what it means is not clear - BBH

Analysts at Brown Brothers Harriman explained that with a slim majority, the British people voted to leave the EU. 

Key Quotes:

Exactly what it means is not clear. Europe insists that the price of sin­gle market access is accepting the EU’s immigration policy. European officials need to tread carefully. They need to be hard enough on the UK to provide an undesirable example for other countries that might be contemplating leaving. At the same time, they cannot be so tough as to prevent cooperation with the UK on other fronts.

Prime Minister May wants to trigger Article 50, which begins the for­mal negotiations of the separation, by the end of Q1 ‘17. There is an additional legal complexity because the extent that May can claim the royal prerogative is disputed. The Supreme Court is expected to make a ruling in the middle of January. There may be other legal chal­lenges that could cause future delays.

The issue is being framed as a hard or soft Brexit. A hard Brexit is the loss of access to the single market. It gives priority to limiting immi­gration. The market responds to developments that increase the risk of a hard Brexit by selling sterling.

A soft Brexit secures access to the single market. Parliament is un­derstood to be less inclined to support Brexit than the population as a whole did. The larger the role of parliament, the more likely a soft Brexit. If triggering Article 50 is delayed, or if a protracted transition state can be negotiated, it may also be supportive for sterling.
The sharp decline of sterling on a trade-weighted index has already begun feeding through to higher inflation. 

The Bank of England is unlikely to respond to firming prices, accepting that the devaluation is a one-off, temporary boost to prices. The improvement in trade may take longer and be less pronounced than the impact on prices. Nevertheless, the decline of sterling, alongside the monetary and mild fiscal support, should keep the economy humming in the first half of the year. However, in the second half, the impact is likely to moderate."