After getting underway last week, the UK referendum campaigns have fuelled significant Pound to Euro (GBP/EUR) exchange rate movement this week. The past few days brought a diverse mix of opinions from within and without the UK on whether an ‘In’ or ‘Out’ vote would be best for the country.
The Pound (GBP) repeated the previous week’s performance, steadily appreciating against the Euro (EUR) over the past few days, ending on a high in the region of 1.2800.
Treasury Releases ‘Brexit’ Forecast: Pound Sterling Advances on Predicted GDP Loss
The most high-profile event by far on Monday was the publication by the Treasury of a 200 page report that detailed how the UK would be ‘permanently poorer’ in the event of a ‘Brexit’. The lengthy document identified how a UK exit would cause UK GDP to be -6% smaller by 2030 than if the country remained a part of the EU.
‘Leave’ campaigners were quick to dismiss the document as erroneous and impossible to verify, while Treasury officials testified to the apparent accuracy by calling the report a ‘sober assessment’. The clout of the piece was diminished slightly in the hours after its release, when it was pointed out that the Treasury forecast assumed that a previous Conservative pledge to reduce UK immigration would not be kept.
Another piece of ‘Remain’ support came from the National Farmers’ Union (NFU) who, after much deliberation, voiced its backing for an ‘In’ vote.
The only other development of note was a call from ‘Leave’ campaigner Chris Grayling for PM David Cameron to remain in place even if the UK left the EU, although MP Ken Clarke earlier stated that the PM wouldn’t last ‘30 seconds’ if a ‘Brexit’ vote came through.
GBP/EUR Advance Continues as ‘Leave’ Camp Responds Unconvincingly to Treasury Forecast
Tuesday opened with a gloomy forecast from Neil Williams of Hermes Investment Management, who estimated that the Bank of England (BoE) might be forced to roll out quantitative easing again in the event of a ‘Brexit’.
The main story, however, was the constructed response by ‘Leave’ Co-Chair Michael Gove to the previous day’s Treasury report.
In addition to repeating the claims of erroneous data being present in the document, Gove stated that £350m a week would be saved and that free trade with Europe would still be possible, even if the UK left the EU. In his most scathing attack, Gove accused the Government of patronising voters and acting as if they were:
‘mere children, capable of being frightened into obedience by conjuring up new bogeymen every night.’
‘Remain’ supporters were quick to bounce back with claims of Gove’s delusions of prosperity outside of the EU, while the ‘Leave’ campaign itself scored an own goal by admitting that it would not be producing a similar document that identified the benefits of voting for a ‘Brexit’.
The latest voter poll gave the ‘Remain’ campaign a significant boost after showing that it held a 9% lead. If the vote had been held on the day the poll was conducted, 52% of respondents said they would vote to ‘Remain’ compared to 43% who would vote ‘Leave’. Crucially, voter turnout for the ‘Remain’ campaign is on the rise, suggesting that those who support the EU are becoming more motivated to have their voices heard in the referendum.
Miscellaneous contributions to the debate were made up of the Environmental Audit Committee praising the positive influence EU membership had on the UK’s environmental protections, while BoE Governor Mark Carney again defended his neutrality after the latest BoE monetary policy statement suggested that the June 23rd vote was increasingly causing economic uncertainty.
US Treasury Secretaries and European Commission President Enter EU Referendum Argument, Pound to Euro Levels
Support for the ‘In’ campaign came from overseas during the middle of the week, although so did inadvertent detraction for the movement, softening GBP/EUR.
Eight former US Treasury Secretaries declared that being part of the EU was the ‘best hope’ for the UK’s economic future, although the response from the ‘Leave’ group was one of scorn.
The ‘Out’ campaign also managed to benefit from an unlikely source, European Commission President Jean-Claude Juncker, who admitted that overregulation had contributed to negative views of the EU. Despite his apparent ambivalence, the EC President nonetheless spoke out against unrealistic trading expectations prevalently held among ‘Out’ supporters.
Other sideshows to the US Treasury statement included a fruitless attempt by the UK Treasury Committee to extract answers about figures from ‘Leave’ supporter Dominic Cummings and the prediction from Bloomberg that the European Central Bank (ECB) and Federal Reserve would leave their interest rates on ice until after the June 23rd vote, which sapped Euro sentiment.
UK Referendum News Soft as Queen Celebrates 90th Birthday, Pound Exchange Rates Muted
With most of yesterday’s House of Commons debate being made up of tributes to Queen Elizabeth II, the overall level of UK Referendum arguments simmered down considerably.
Most notable among the scant developments were the announcements that Labour MP Alan Johnson was writing to the nation’s Student Union Presidents, asking for their support in galvanising the large numbers of undecided student voters into making an ‘In’ decision.
Elsewhere, the Number Cruncher Politics Referendum Forecast estimated that the chances of a ‘Brexit’ outcome were as low as 20%, which bolstered Sterling considerably due to the implied stability of a more likely ‘In’ conclusion to the vote.
Obama’s Support for UK’s EU Membership Sent GBP/EUR into a Bullish Rise on Friday
A visit by US President Barack Obama had a significant impact upon the ‘Brexit’ referendum argument on Friday after the Leader of the Free World urged UK voters to choose to remain a part of the EU. The President drew harsh criticism from the ‘Leave’ campaign, but this ended up backfiring after both Boris Johnson and Nigel Farage were criticised for referring to arguments that the President has an anti-UK outlook because of his ‘part-Kenyan’ heritage.
Obama’s support allowed the Pound Sterling to Euro (GBP/EUR) exchange rate to make gains of 0.9% on Friday.
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 situation as it unfolds.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.2800 and the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7812 on Friday.