22 Jul 2015
A Bexit 2016/17 and GBP - BTMU
FXStreet (Barcelona) - Analysts at The Bank of Tokyo-Mitsubishi UFJ, Ltd noted the Conservative government has committed to holding a referendum on the UK’s membership of the European Union, highlighted by inclusion in the Queen’s speech in May and noted the potential outcomes and relative to the pound.
Key Quotes:
"The government has promised to hold the referendum before the end of 2017 but inclusion in the Queen’s speech and the decision of the Labour Party to support holding a referendum means smooth passage through the Houses of Parliament and the potential for the vote being brought forward to 2016."
"The question posed to UK voters will be “Should the UK remain a member of the European Union?”
"There are too many numerous unknowns at this stage to make a clear prediction of the outcome of the referendum or indeed the opinion polls ahead of the referendum that would impact the pound. However, what is clear is that the prospects of a “Yes” vote to remain in the EU will be a lot higher if the UK economy is performing well. The UK consumer, in particular will be key. Continued strong consumer confidence would likely discourage voters from changing the favourable status quo."
"There are compelling reasons for having the Brexit referendum as quickly as possible assuming PM Cameron manages to obtain a good enough deal from the EU. Consumer confidence at close to a record high and the potential for Greece to remain off the radar for a period provides an attractive window for the UK government. Strong economic conditions might not be sustained into 2017 given both the Fed and the BOE may be raising rates from later this year."
"There are higher risks of renewed turmoil in Greece further into the future if, as many expect, the economy fails to strengthen due to austerity. Downside risks for the pound in a more positive economic environment would likely be limited to a similar size as what transpired around the Scottish referendum with a much greater chance of a “Yes” victory. However, a less favourable economic environment (weakening UK economy, increased Grexit concerns) would leave the pound more vulnerable to much greater downside risks as the financial markets contemplate a “No” victory. "
Key Quotes:
"The government has promised to hold the referendum before the end of 2017 but inclusion in the Queen’s speech and the decision of the Labour Party to support holding a referendum means smooth passage through the Houses of Parliament and the potential for the vote being brought forward to 2016."
"The question posed to UK voters will be “Should the UK remain a member of the European Union?”
"There are too many numerous unknowns at this stage to make a clear prediction of the outcome of the referendum or indeed the opinion polls ahead of the referendum that would impact the pound. However, what is clear is that the prospects of a “Yes” vote to remain in the EU will be a lot higher if the UK economy is performing well. The UK consumer, in particular will be key. Continued strong consumer confidence would likely discourage voters from changing the favourable status quo."
"There are compelling reasons for having the Brexit referendum as quickly as possible assuming PM Cameron manages to obtain a good enough deal from the EU. Consumer confidence at close to a record high and the potential for Greece to remain off the radar for a period provides an attractive window for the UK government. Strong economic conditions might not be sustained into 2017 given both the Fed and the BOE may be raising rates from later this year."
"There are higher risks of renewed turmoil in Greece further into the future if, as many expect, the economy fails to strengthen due to austerity. Downside risks for the pound in a more positive economic environment would likely be limited to a similar size as what transpired around the Scottish referendum with a much greater chance of a “Yes” victory. However, a less favourable economic environment (weakening UK economy, increased Grexit concerns) would leave the pound more vulnerable to much greater downside risks as the financial markets contemplate a “No” victory. "