Dean Turner, UK Economist at UBS Wealth Management, said the announcement of progress in the negotiations is in line with his “base case” that the talks will move to phase two after this week’s European Council meeting.
Mrs May passed her biggest hurdle yet on the road to Brexit as the European Commission finally cleared the way for negotiations on the future relationship after the UK’s withdrawal from the EU.
Foreign Secretary Boris Johnson and fellow Cabinet Brexiteer Michael Gove gave their public blessing to the deal.
Britain will pay a “divorce bill” of up to £39bn under the terms of a withdrawal package agreed with Brussels.
Commission President Jean-Claude Juncker said it represented “sufficient progress” for negotiations to move on to their second phase, subject to approval by leaders of the remaining 27 EU states this week.
Mr Turner said: “It is still not a done deal, as the 27 heads of governments still need to formally approve the recommendation.
“Moreover, elements of the Conservative Party will be scrutinising what has been offered to move the talks forward.
“However, the risks that we don’t see approval this week are minimal, in my view, as all sides will have their eyes on the bigger prize.
“The announcement should partially lift the cloud of uncertainty hanging over the UK, and it probably strengthens the PM’s position, reducing the (already low) possibility of an election in the next twelve months.”
Overall, UBS analysts take a positive view of global equity markets in 2018.
They predict robust economic growth and say there is limited evidence of an impending downturn, although UBS also anticipates that central banks are likely to err on the side of caution as they tighten monetary policy in the year ahead.
Oil prices are also likely to move sideways, according to UBS.