Cameron promises EU referendum by 2017, as EU push through Tobin tax

Tom Tong23/Ιαν/2013Currency Updates


Despite weak data from the UK yesterday, mainly regarding the public sector net borrowing and finances, the pound managed to edge slightly higher against the Greenback yesterday evening, but started to follow its negative trend of selling off during the night again.

The CBI order expectations for January came in with a downside surprise by contracting further from -12 down to -20, in contrary to the widely expected increase to -10. A further negative indicator for the UK economy to start off this year, as fewer orders may have lagging negative effects on production and the labour market.

Today, the jobless claimant count is released, with an expected increase of 0.5K in December, compared to the -3.0K decrease experienced in November. Any negative surprise on this data could prove damaging for an already weak sterling.

David Cameron is set to make a commitment today regarding an EU referendum and discuss the UK’s relationship to the union. He has been quoted saying ‘It is time for the British people to have their say. It is time to settle this European question in British politics’

Furthermore the BoE minutes are set to be announced; an unanimous vote for the kept interest rate is expected; the important indication to look out for is the BoE view on it’s decision regarding the asset purchases. It’s worth noting here that the Bank of Japan has followed in the US Fed’s way of adopting open-ended asset purchases, thus allowing for unlimited easing. The decision is exactly what the Japanese prime minister has been pushing for and there has been much discussion lately regarding central banks losing their independence. Thus succumbing to heavy political pressure as politicians try to keep their countries exports competitive and the exchange rate low.


The EU’s 27 Finance ministers met in Brussels yesterday and they have given the go-ahead for 11 EU members including Germany and France to prepare for a new financial transaction tax, otherwise known as the Tobin tax. It’s a 40 year old idea to discourage an excess of speculative transactions.

The UK has opted to stay clear of the tax with the argument that it will have little effect unless it’s applied globally, as investors will only move their activity to an exempt country in order to avoid the tax.

The only significant data set out of the eurozone was the German ZEW survey, recognised as the leading indicator of Germany’s economic health. The data came in much stronger than expected at 31.2, up from a single digit around 7, the expectation lay around the number 12.

On the other hand the data rather surprisingly failed to spark a rally in the EUR and the common currency performed with mixed result against it counter parts. The only indicator released from the euro-zone today is a survey of Consumer confidence set to be released at 3pm GMT.


The Green back suffered small losses against most of its counterparts during yesterday’s trading.

In terms of data, the only significant figure out of the US yesterday was data regarding existing home sales. The data came in with a negative surprise and contracted in contrary to its expected increase. But when looking further into the reasons for this contraction it becomes apparent that it was caused due to a shortage of houses on the market rather than lack of demand. Thus it’s not all that bad.

Today there is no significant data released across the pond, but a vote by US lawmakers will take place on the question of suspending the US borrowing limit for an additional 4 months. The intention is to give congress enough time to agree on a solution to tackle the fiscal cliff issues through spending cuts and tax increases.

The markets seem to widely anticipate to be given extra time at least in the short term, as risk appetite is healthy, but issues and uncertainty regarding this issue might lead to risk aversion.


Written by Tom Tong

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