GBP: Rising Brexit risk - SocGen

Research Team at Societe Generale, notes that the UK’s EU referendum has been set for June 23 which has raised the uncertainty, and pummelled sterling.

Key Quotes

“The Brexit camp has been split largely between the “Vote Leave” and “Grassroots Out” groups. Thus, the possibility of a popular unifying figurehead for the Brexit campaign would be a huge game-changer. Cable implied vol has surged, capping an almost five vol advance in the 6M tenor since October. BoE Governor Carney will likely be asked about Brexit risk during his appearance before the Treasury Select Committee this week. An in-depth analysis of the referendum and Brexit from SG economics is available at this link.

Beyond the UK, global risk sentiment has been improving fitfully. The replacement of the head of the Chinese stock market regulator gave a further boost to Chinese equities to start the week. The Euro area’s (EA) composite PMI however slid to a one-year low amid signs that the global industrial slowdown is affecting the region.

There is no scheduled G10 central bank meeting this week. We get the second readings of Q4 GDP growth from Germany, UK and US this week, plus the German flash CPI and US durable goods orders. The list of key market events this week includes:

• Feb 23: Germany Q4 GDP, Germany IFO survey, US S&P/CS home price index, and US existing home sales.

• Feb 24: US Markit composite PMI, and US new home sales.

• Feb 25: Japan CPI, Australia Q4 private capital expenditure, UK Q4 GDP, EA CPI, and US durable goods orders.

• Feb 26: Norway unemployment rate, Germany flash CPI, US Q4 GDP, and US personal income and spending.”