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22 Feb 2016
Brexit: No signs of cloud clearing - ING
Research Team at ING, suggests that the Brexit referendum has been confirmed for June 23rd and we have a good understanding of which camp the politicians are in.
Key Quotes
“However, the polls continue to show the outcome is too close to call, likely meaning UK asset prices will continue to suffer.
With David Cameron having achieved a “deal” with other EU leaders that he felt gives him enough substance to back an “in” vote for the UK he has confirmed that the referendum will be held on Thursday 23rd June. This has also paved the way for the politicians in his party to split on how the want to vote, meaning that campaigning is already starting.
The major coup for the “out” campaign was that London Mayor, Boris Johnson, a relatively charismatic and popular politician will be campaigning for the UK to leave the EU. However, the Prime Minister can seek some solace in that he said that Johnson said he will not be going head-to-head in any of the TV debates on the Brexit issue.
Over the next 24 hours we are going to be hearing more of the opinions of British business leaders with a largely pro-EU sentiment expected to be expressed. Nonetheless, the opinion polls are not getting any clearer with it looking too close to call. Given it is as much a political as an economic decision the polls are likely to remain close right up to the referendum, meaning UK asset prices, and sterling in particular will continue to struggle.
Of late we have been arguing that markets have yet to truly account for the probability weighted cost of the UK exiting the EU, with GBP’s year-to-date plight predominantly a function of the benign global risk environment and a dovish re-pricing of the BoE’s hiking cycle.
An update of our analysis shows that so far Brexit risks have at best had an indirect impact on the currency via the rates channel. With the outcome of the referendum likely to be too close to call, our message is clear: expect further GBP downside over the coming months as our estimate for a 3-4% Brexit risk premium gets fully embedded into markets. We forecast GBP/USD to be trading in the 1.30-1.35 range ahead of the June vote.”
Key Quotes
“However, the polls continue to show the outcome is too close to call, likely meaning UK asset prices will continue to suffer.
With David Cameron having achieved a “deal” with other EU leaders that he felt gives him enough substance to back an “in” vote for the UK he has confirmed that the referendum will be held on Thursday 23rd June. This has also paved the way for the politicians in his party to split on how the want to vote, meaning that campaigning is already starting.
The major coup for the “out” campaign was that London Mayor, Boris Johnson, a relatively charismatic and popular politician will be campaigning for the UK to leave the EU. However, the Prime Minister can seek some solace in that he said that Johnson said he will not be going head-to-head in any of the TV debates on the Brexit issue.
Over the next 24 hours we are going to be hearing more of the opinions of British business leaders with a largely pro-EU sentiment expected to be expressed. Nonetheless, the opinion polls are not getting any clearer with it looking too close to call. Given it is as much a political as an economic decision the polls are likely to remain close right up to the referendum, meaning UK asset prices, and sterling in particular will continue to struggle.
Of late we have been arguing that markets have yet to truly account for the probability weighted cost of the UK exiting the EU, with GBP’s year-to-date plight predominantly a function of the benign global risk environment and a dovish re-pricing of the BoE’s hiking cycle.
An update of our analysis shows that so far Brexit risks have at best had an indirect impact on the currency via the rates channel. With the outcome of the referendum likely to be too close to call, our message is clear: expect further GBP downside over the coming months as our estimate for a 3-4% Brexit risk premium gets fully embedded into markets. We forecast GBP/USD to be trading in the 1.30-1.35 range ahead of the June vote.”