Over the weekend the Vote to leave the EU campaign released a list of 250 names of business leaders who are in favour of the UK leaving the EU. The list includes former HSBC chief executive Michael Geoghegan, and the hotelier Sir Rocco Forte. This is an attempt by the Vote Leave campaign to paint an exit in a positive business light as many prominent business people have previously come out in favour of staying the EU.
However, the Bank of England’s Financial Policy Committee warns on Brexit risks to financial stability. The committee said "the most significant near-term domestic risks to financial stability" were connected to the referendum on EU membership on June 23rd. It referred to risks as a period of "heightened and prolonged uncertainty" as the central bank moved to bolster banks risk buffers and tighten lending to landlords. The FPC also stated that sterling could be forced lower, though that has potential benefits - making British industry more competitive and raising the cost of imports, which would arguably be welcome at a time when inflation is well below the Bank's 2 percent target.
Standard & Poors chief Sovereign ratings officer Moritz Kraemer also stated that the Brexit could lead to Britain losing its AAA S&P credit rating which it has maintained since 1978. This would be due to the UK’s ‘deep political, financial and trading ties in Europe’ which would be at risk if Britain were to leave the EU.
The pound closed the quarter with its heaviest trade weighted loss since late 2008 which was mainly attributed to global financial turmoil, the Brexit and a lack of positive sentiment surrounding a potential interest rate hike by the Bank of England. Also last week, the Markit manufacturing Purchasing Managers' Index (PMI) rose to 51.0 last month. British manufacturing ticked up last month from its weakest level in nearly three years and quarterly growth remained disappointing. It comes as the business secretary, Sajid Javid, visits Port Talbot to meet workers and management affected by Tata's decision to sell its UK assets. The Brexit was again a major talking point this weekend as former England football captain Sol Campbell is the latest celebrity face to weigh in on the EU referendum saying he was backing independence.
Over in the states, we had Core Personal Consumption Expenditure – Price Index (YoY) (Feb) at 1.7% in line with previous. We also had Core Personal Consumption Expenditure – Price Index (MoM) (Feb) at 0.1% which was below the expected figure which was 0.2%. These are important figures in the US as two thirds of their economy is made up my consumer spending. This led to a sharp fall in the value of the USD. In addition, Federal Reserve Chair Janet Yellen emphasised global dangers to growth and inflation, hence the need to proceed "cautiously" on tightening policy. She said global risks were not expected to have a deep impact on the US, but caution was still appropriate. Her tone was similar to the Fed's statement in mid-March, when the central bank made no change to rates and guided expectations towards a slower pace of increases after December's increase. Ms Yellen repeated her message from earlier public speeches that volatile oil prices and China's slowing growth, along with how soon inflation would reach the Fed's 2% goal, were key factors guiding the Fed towards taking a gradual approach on raising rates.
The U.S. dollar hit its lowest level against the euro in nearly seven weeks last week following dovish comments from Federal Reserve Chair Janet Yellen that pushed out expectations for the central bank's next interest rate hike. weakness overseas.
A relatively quiet week of data from the Eurozone, with German unemployment change showing a marginal decrease in the number of unemployed members of the workforce. Following the poor USD data, EUR appreciated across the board with EUR continuing its four straight sessions of gains against the dollar.