Welcome to the real Brexit trading
Brexit will put jobs at risk say UK business bosses 198 business leaders have written to The Times expressing Brexit concerns
Possibly not the last article today with the B word in the title.
The letter begins:
"Sir, The businesses we lead represent every sector and region of the UK. Together we employ hundreds of thousands of people across the country. Following the prime minister's renegotiation, we believe that Britain is better off staying in a reformed European Union. He has secured a commitment from the EU to reduce the burden of regulation, deepen the single market and to sign off crucial international trade deals."
Full (gated) letter here
Those putting their name to the letter include chairmen or chief executives of 36 FTSE 100 companies including those from BT, M&S and Vodafone.
It says Cameron had secured a commitment from the EU "to reduce the burden of regulation, deepen the single market and to sign-off crucial international trade deals".
"Business needs unrestricted access to the European market of 500 million people in order to continue to grow, invest and create jobs.Britain will be strong, safer and better off remaining a member of the EU."
Two leaders of Goldman Sachs in Europe have also signed the letter, signalling a wider concern among major American banks based in London but there were some notable absences from the letter including bosses of FTSE 100 firms Tesco, RBS and Barclays.
The BBC has more here
Debate from both sides will continue unabated right up until the 23 June referendum. In the meantime cable trades at 1.4118 having failed above 1.4150 but finding support into 1.4100.
UK's Osborne Says 'Brexit' Would Be 'Profound Economic Shock': BBC Leaving the European Union (EU) would be an "enormous economic gamble" and "a profound economic shock" for Britain, UK Chancellor George Osborne told a BBC News reporter on Friday. Osborne said he would do everything to keep his country in the common bloc.
The political campaign has started right after Prime Minister David Cameron announced last week that the EU referendum would take place on June 23.
The governing Conservative party has split in two camps ahead of the plebiscite. The prime minister and the chancellor lead the pro-EU camp, while euro-sceptics - mostly right-wing Tory backbenchers - kicked off their campaign with London Mayor Boris Johnson and Secretary of State for Justice Michael Gove so far being the most prominent figures on board.
EUR: The Other Brexit Trade; Shorts Attractive - Credit Agricole EUR moved in sympathy with the beleaguered GBP as market fears grew that a Brexit-could strengthen the centrifugal forces in the EU before long.
It doesn’t help the EUR that the ECB remains on course to deliver more aggressive easing as soon as March, cementing the currency’s status as a funding currency. Growing political risks in the EU, and slowing global trade and growth will continue to weigh on business sentiment in the Eurozone as highlighted by the weaker ifo.
All that should keep pressure on the ECB to ease further from here. Despite all that, there seemed to be very little appetite for EUR shorts in the market with investors having aggressively cut their downside bets in recent weeks. This could suggest that crowded market positioning need not stand in the way of continuing the selloff in EUR.
Germany's Schaeuble says Brexit would be a "catastrophe" German fin min in an interview with the BBC broadcast earlier today
- it would be a catastrophe if Britain left the EU and the EU would be weaker without the UK but it would "not commit suicide"
- Brexit would be an economic "poison"
- a British vote to leave the EU would damage the British, European and global economies
"We would have years of the most difficult negotiations, which would be very difficult for the EU as well. And for years we would have such insecurity that would be a poison to the economy in the UK, the European continent and for the global economy as well,"
He didn't accept the notion that Britain could follow the example of countries such as Norway, which accepts freedom of movement, pays contributions to the EU budgets and applies the single market's rules and regulations without having a vote on them.
"I cannot really see why the UK would be interested in staying within the single market without being able to make decisions about it. It doesn't really make sense."
Reuters carries more here
The views of leading EU figures like Schaeuble are relevant given that the market is still trying to evaluate the negatives of Brexit on the euro.
In other Brexit fall-out news this week-end the UK fin min George Osborne has scrapped proposed pension tax reforms for fear of a referendum voting backlash and the head of the British Chambers of Commerce, has been suspended for voicing his support for the Leave campaign. The official line taken by the BCC is one of neutrality given that their members are equally split. Suffice to say Boris has been all over it to gain some political advantage.
Both stories will gather momentum as the week pans out and we'll provide you with further detail and analysis, but for the moment it's unlikely to have any GBP price impact.
Brexit and Britain - what would it mean for UK trade? The stakes will be high for Britain's historic role as a free-trading nation when it holds a referendum on whether to stay in the European Union on June 23.
There is no precedent for an economy as big as Britain's leaving a trade bloc, and the rival campaigns paint contrasting pictures of what quitting the EU might mean for its trade.
Below are some of the main issues around the potential risks or benefits for British trade of a so-called Brexit.
TRADE WITH EU - HOW MUCH RISK?
Britain's most important trade partnership is with the EU's single market, the world's biggest trade area.
Campaigners seeking to keep Britain in the EU say it would be in a weak negotiating position if it left and then sought to hammer out a trade agreement with its former partners, something many "out" campaigners say they want.
Government figures show 12.6 percent of Britain's economic output is linked to exports to the EU's 27 other members, for whom only 3.1 percent of output is linked to exports to Britain.
Pascal Lamy, a former head of the World Trade Organisation, said a post-Brexit Britain would probably have to resort to raising its import tariffs on EU and other countries' goods or restricting access to its market in services in order to gain some muscle for trade talks that could last as long as a decade.
"Britain would have to say, 'Sorry, consumers, but you have to pay more'. It's just crazy," said Lamy, an ex-EU trade chief.
In return for a trade deal, the EU would want Britain to make contributions into its budget and to keep on allowing EU citizens to work on its soil -- two big concerns for the Brexit camp. It could also face a long battle to ensure its banking industry did not face hurdles doing business in Europe.
"Out" campaigners say the EU would probably be reluctant to reward a breakaway Britain with a trade deal but would not want to impede its firms from selling into the world's fifth-biggest economy by raising tariffs or imposing tough new regulations.
They say the boot would even be on Britain's foot because, in value terms, EU exports of goods and services to Britain were worth 289 billion pounds in 2014, substantially more than Britain's 230 billion pounds of exports the other way.
"Commercial imperatives are very powerful, much more powerful than politicians," William Dartmouth, deputy chairman of the UK Independence Party (UKIP), said.
If a deal could not be reached and WTO-compliant tariffs were imposed on trade between Britain and the EU, they would be low enough not to impede business, Dartmouth predicted.
Tariffs agreed by the EU with the WTO for imports from countries outside the bloc stand at below 5 percent on over a third of factory goods but have been abolished on about 30 percent more; the EU has a nearly 10 percent tariff on cars, a big British export.
A breakaway Britain would also need to renegotiate its WTO membership terms with all WTO members, including some with which Britain has frosty relations such as Russia and Argentina
The Brexit stories are stacking up to weigh on GBP The drop in the pound gave too much credit to the poll story. A quick mooch around the news today and there's plenty more reasons why it's under pressure. Here's some of the other headlines that have hit today;
- EU's Jonathan Hill (commissioner for financial services) in France's Le Figaro says Brexit will create a great deal of uncertainty for firms and Brexit supporters are wrong to think trade will not be disrupted
- The chief investment manager of pension fund PGGM says that Brexit could be a shockwave to the market. PGGM oversee assets of around €183bn
- Eurostar's CEO says that it may be harder doing business after a Brexit
- A latest Bloomberg survey has economists reducing the UK's 2016 growth forecast to 2.0% from 2.2%. They also say the chances of a BOE rate cut have increased to 23% from 10% last month
There's no news that has singularly lead to the moves in sterling, it's more that they are all weighing and causing sentiment to turn negative. When that happens the market just gets to the point where it sees more :-( than :-) and that becomes enough to get folks reducing positions.
Alongside the central bank events this week we also have the Chancellor's budget and latest jobs data on Wednesday. The budget can be a pound mover but there's always a lot of details and spin to chew through. The jobs report will be bigger as it might lead to some last minute expectation adjustments into the BOE, not for any action but for the dovish/hawkish message from the MPC.
Trading Brexit: The Long & Short Of It Financial markets are starting to take it seriously, and with good reason. Polls show a tightening race ahead of the referendum on June 23rd, while internet searches for “Brexit” are running slightly higher than the peak seen for “Grexit”, when Greece’s status was in jeopardy. A British exit from the EU would stir up new uncertainties, both for the UK and the Eurozone, that a decision to remain would avoid. So we can understand why Sterling has headed weaker this year.
However, we would be buyers of Sterling and other affected assets just ahead of the vote. Should the “remain” side win, Sterling would likely see a quick rebound, just as it did after the Scottish independence referendum, or when a general election seen as a close call returned the certainty of a Tory majority. Although there hasn’t been any obvious underperformance so far in UK equities versus others in Europe, that could still develop, and would be reversed on a “stay” vote.
True, a vote for “leave” would initially be a further negative for Sterling, as investors worry about risks to British trade, or even London’s status as a European financial centre. But second thoughts on its long term implications could reverse that damage, since a “Brexit” need not be the slamming of economic doors to Europe that many assume. History, trade patterns and other factors suggest that the most likely mediumterm outcome of a “leave” victory would be fairly minimal in terms of actual disruptions to trade, markets or capital flows.
Anti-Brexit Rhetoric Boosts Pound as Odds for 'Remain' Camp Surge The British pound kept its momentum against the US dollar on Monday after gains late last week driven by the US President Barack Obama's crystal clear support for the UK's membership of the European Union (EU).
So far it appears that politics and the anti-Brexit rhetoric on both sides of the Atlantic continue to influence the British currency's curve more than UK macro fundamentals, given sterling's notable resilience to weak retail sales figures last week, and expectations of a slower GDP growth in the first quarter of this year.
Betting company Ladbrokes said last week on Friday that the odds for the 'Remain' had surged after the Obama comments on Britain's need to remain inside the EU, and that the possibility of Brexit had "diminished sharply."
According to Ladbrokes latest figures, the support for Brexit plunged to 29% on Friday afternoon, down from 34% measured at the start of the last week. The odds for the 'Remain' camp surged to 77%.
"President Obama has raised the hackles of the UK’s pro-Brexit campaign by warning that it could take up to a decade to negotiate a trade deal with the US," Rabobank analysts wrote in a note on Monday.
The support for the 'Remain' camp has been strengthening recently after nearly all the domestic and global credible forecasting and economic organizations warned that Brexit could make the British people poorer, and could have detrimental near and longer-term economic consequences.
UK EU Referendum Poll: Support for 'Leave' Camp Increases Slightly
Support for Britain’s exit from the European Union (EU) increased by two points to 43% despite a surge in anti-Brexit rhetoric recently coming from both the UK and US political elites.
The number of people wanting the UK to remain inside the European common bloc decreased by two points to 51%, suggesting a rather tight June 23 EU referendum, new figures from the ORB poll for The Daily Telegraph showed on Tuesday.
The survey also showed that the motivation on the side of potential voters to vote for the 'Remain' camp has increased to 66%, a one-point rise from the last week's poll, while the motivation on the side of the Brexit supporters stood steady at 70%.
Exclusive: EU would divorce UK before any new relationship - sources The European Union would insist on completing a swift divorce with Britain before starting to forge any new relationship if UK voters decide in June to leave the 28-member bloc.
Two EU sources familiar with the bloc's latest thinking on a possible Brexit told Reuters on Thursday there was no appetite to grant any extension of the two years provided by the EU's Lisbon Treaty for negotiating a withdrawal, while any new trade partnership would take many more years to conclude.
The stark view from Brussels means Britain could initially be cut adrift without any preferential relationship with its biggest trade partner. It contrasts with suggestions by "Leave" campaigners that London could secure a special status preserving market access before it formally leaves the EU.
Top EU officials say they are still confident that Britons will ultimately vote in a June 23 referendum to stay in the community they joined in 1973, despite opinion polls showing a close race.
However in case of a "Leave" vote, the European Commission has tentative plans to hold a rare Sunday meeting on June 26 to set its strategy, one source told Reuters.
EU leaders would hold a brief summit with Britain two days later, at which London would be expected to give formal notice to quit. The 27 other states would then meet without British representatives to decide how to conduct the withdrawal negotiations and take the union forward, based on proposals from the executive Commission.
"It is in our interest to do the divorce as quickly as possible. There's no appetite for negotiating new terms in the first two years," one source said.
Another source said: "The shorter the better. No one wants to go beyond the two years. The show must go on."
Both sources spoke on condition of anonymity because of the acute political sensitivity of any contingency planning for a British departure.
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Dave's deal euphoria disappears before the weekend is up.
Poor old Cameron. He's like a bloke who's just won the lottery then watched his ticket blow out his hand and into the Thames.
If I'm honest I wasn't expecting things to go potty quite so quickly. I knew the weekend press was going to go to town but I thought that all the campaigners might give it a couple of days to set their stalls out. We know that's not the case now and the speed at which the politicians have started choosing sides is a big part of why the pound is super volatile right now.
The Boris news is obviously big due to his position in London. The referendum is going to be a big deal for the City. Like it or not it's the source of most of our income and that's not to be taken lightly as he has the ear of a lot of big City firms.
Aside from the politicians raising their flags, many of the country's biggest firms will also be having a say on what an exit might mean. That's also going to have a strong affect on the pound.
All this news has come very quickly and the average Brit will take a bit longer to chew it all over and form their opinions. As I mentioned Friday, this is just the very beginning of the Brexit trade and we now have heightened news headline risk for the pound.
The next publicised big risk is Cameron speaking to parliament at 15.30 GMT today. He's going to run over the details of the EU deal and is likely to touch on the dissenters in government. It might be a bit early for any drastic action but in the days and weeks ahead, if he faces a huge revolt from his own party, he may very well put his neck on the line and offer to resign if the leaving vote wins. That would be a very big step that could throw the government into disarray. I'm not saying it will happen but this is the sort of stunt our politicians can pull out of the hat and we have to be aware of it.
Trading politics is usually ugly at the best of times so for those not from these shores or less experienced, it might be wise to think about taking a pound trading holiday until things settle down a bit. If you are going to trade it then stick to the well defined levels and make sure you have your trades on a tight lead.
Looking at the prices, I'm not surprised by the moves. We saw Asia react first and then London took up the baton and the chart shows those moves distinctly.
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