In or Out? Brexit -by- Michael Oyebamiji

Over the weekend the Prime Minister of UK David Cameroon made an announcement of a referendum at the end of June later this year (2016). This comes after securing a deal for UK membership in the European Union. The deal he secured was basically to allow UK firms to operate in London without any discrimination for being outside the Eurozone, a seven years break on EU migrants in work benefits and also an exclusion of Britain from a political integration. This deal was unfortunately rejected by top politicians and public figures. The mayor of London rejected the deal and decided to campaign for a Brexit, Michael Gove who is also a top politician in the conservative is also campaigning for an exit and the likes of George Galloway and Nigel Farage.

This morning, the British pound took a battling on the back of the possibility of an exit. GBP has dropped by more than 1% against the USD in the early hours of trading. The risk of uncertainty of a possible exit might see the GBP further depreciate against all currencies till after the referendum. It is estimated that if UK should leave the Eurozone, it might have a negative impact on the UK economy and most importantly most companies on the ftse 100 might suffer a huge loss considering free movement of trade and human power will be restricted.

With this uncertainty surrounding Brexit, I think GBPUSD might drop to the lows of 1.34 over the next couple of months.

Elsewhere, the German manufacturing data released this morning missed estimate at 50.2%, market was expecting a reading of 52.%. This is an indication that the German economy is approaching recession. However, the Services pmi reading beat estimates at 55.1% versus 54.7%.

Later today, the US manufacturing data will be released. Market is expecting 52.3% which is below the previous month’s estimate of 52.4%.