The UK Referendum debate has been relatively low-key this week, with the more prominent situation of UK PMIs and local elections having the greatest lasting impact on the appeal of the Pound (GBP) against the Euro (EUR).
On account of the still-high levels of uncertainty regarding the UK Referendum, the Pound has made little overall progress against the Euro, with a starting exchange rate of 1.2777 being offset by a closing rate around 1.2707 on Friday.
UK Business Confidence, EC Forecasts, Polls and Manufacturing; Tuesday’s Pound Sterling News
With the early May bank holiday on Monday, UK Referendum developments were sparse, which resulted in Tuesday marking the proper start to the week.
There were two particularly notable announcements; the first was an ICAEW poll which highlighted the rising levels of business uncertainty as having been at least partly caused by the approaching UK Referendum.
The second development was the release of the European Commission (EC) spring economic forecast, which explicitly identified the possibility of a ‘Brexit’ as a reason for limited growth in both the UK and the EU.
Elsewhere, an ICM poll put the difference between the ‘In’ and ‘Out’ campaigns as closer than many would like, with ‘Leave’ edging ahead by one point.
On the domestic data front, investors in the Pound were shocked by the outcome of the manufacturing PMI for April, which fell into the contraction range for the first time in three years. Continuing with manufacturing news, notable ‘Brexiteer’ Professor Patrick Minford argued that at the benefit of having cheaper imports into the UK, national manufacturing would effectively be ‘eliminated’ in the event of a ‘Brexit’ – something he claimed would be a positive development for the economy.
Peer and Moody’s Warnings on Wednesday, along with PM’s Defence of ‘Brexit’ Referendum Campaign
Wednesday’s ‘Brexit’ news was primarily focused around cautions and defences; in the first instance, the Lords EU Committee weighed in on what a ‘Leave’ vote could result in.
For the most part, the Peers were of the opinion that negotiations for UK deals after an exit from the EU would be ‘difficult and lengthy’ and that after a ‘Brexit’, it would be hard to determine what rights UK expats in Europe would be able to keep and lose. Although this advice seemed to favour an ‘In’ vote, it is worth stressing that the Peers desired to remain politically neutral when it came to the decision itself.
The other big Referendum development that took place over the course of the day focused on the Prime Minister himself, who was speaking to the House of Commons Liaison Committee. The PM said that it wasn’t ‘remotely’ possible that Turkey would join the EU for decades and that in the event of an ‘Out’ vote, he would remain in his position despite speculation about a ‘Brexit’ coming along with an automatic resignation from the PM.
Closing off the UK-EU news was a worrying forecast from Moody’s, which estimated that:
‘Even if the EU survives its current challenges largely unscathed, even a ‘small’ future crisis could threaten the sustainability of current institutional frameworks’.
UK PMI printings continued to disappoint in the middle of the week, with the construction variant for April dropping to a three-year low.
Thursday Saw Japanese PM Intervention in ‘Brexit’ Referendum and Services PMI Result Move GBP/EUR
Yesterday’s UK Referendum news was fairly run of the mill, although more unusual developments took place elsewhere.
In terms of actual stories, one of the most notable occurrences was a series of comments made by Japanese Prime Minister Shinzo Abe, who threw his support behind the ‘In’ campaign by stating that ‘many Japanese companies set up their operations in the UK precisely because the UK is a gateway to the EU’.
Another piece of support for the ‘Remain’ vote came from John Malone, Chairman of Liberty Global, a telecommunications company. Malone toyed with the possibility of donating as much as £500,000 to the ‘In’ campaign, so as to reduce the chances of an uncertainty-riddled ‘Out’ vote occurring.
The last UK PMIs for April, covering the composite and services fields, came yesterday morning. Despite both printings falling on previous entries, the Pound actually appreciated, potentially because neither PMI fell into the contraction range.
Today: US Commentary on UK Referendum Fails to Generate Pound Sterling Movement
The week has closed for the UK Referendum debate on a pair of contributions from the US.
In the first instance, four Federal Reserve officials have stated that the uncertainty associated with the UK Referendum may have a major influence on their interest rate decision in June (before the Referendum vote day).
Additionally, the presumptive Republican presidential candidate Donald Trump has voiced his sentiment that the UK would be better off outside the EU.
That’s it for the UK Referendum roundup this week, but we’ll be back next week with all the latest UK-EU news to keep you up to speed with the debate as it progresses.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.2693 and the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7879 today.