UK: Oh no Bo Jo - Investec

Research Team at Investec, notes that the UK Political developments dominated the press this weekend as the EU referendum campaign continues to build ahead of the June 23 vote.

Key Quotes

“Vote leave advocate Nigel Farage (the UKIP leader that was a main driver behind the EU referendum coming to pass) has announced he is a "Boris fan". Furthermore he would back the former London mayor to succeed David Cameron, if after a Brexit vote the prime minister were to resign.

Boris Johnson was in the news himself this weekend, likening the current EU project to many previous regimes that have attempted a unified Europe. "Napoleon, Hitler, various people tried this out, and it ends tragically. The EU is an attempt to do this by different methods," he said. "But fundamentally what is lacking is the eternal problem, which is that there is no underlying loyalty to the idea of Europe...There is no single authority that anybody respects or understands. That is causing this massive democratic void". Many parts of the press focused on Mr Johnson's historical parallels without, perhaps, crediting the message he was trying to convey.

Meanwhile, speaking on the Andrew Marr show, Bank of England governor Mark Carney said he had not overstepped the mark with the Bank of England's recent warnings and assessments of a Brexit, in particular the claim that a vote to leave the EU could spark a recession. The governor said the Bank's role was to "identify risks, not to cross your fingers and hope risks would go away". Further afield US officials also waded into the debate as the Fed’s Williams said on the weekend “Brexit more on my mind as a risk to the US economy than the US election.”

Where has this left the Pound? On Friday a healthy University of Michigan report and a very strong US retail sales number (that will likely boost Q2 GDP) saw some US Dollar strength that sent the Pound back below 1.4375 against the US Dollar. The move in spot caused Sterling option volatility to rise sharply back to pre-Obama's comments on the referendum and his 'back of the queue' stance. A stark reminder how vulnerable the Pound can be to sentiment in the next few weeks. The weekend's political turns saw the Pound open a little lower but soon retraced the move in what was a fairly quiet and range-bound overnight trading session.”