EU referendum likely to weigh on sterling over the medium term, says SocGen
The Conservatives' victory in the UK election may be a boost to sterling assets in the short term, but it also implies that a referendum on Britain exiting the EU is now likely in 2017, if not earlier, Societe Generale said in a note on Friday.
“Though the latest opinion polls suggest voters would today reject an EU exit, the issue is likely to cause further divisions within the Conservative Party and could weigh on GBP over the medium term,” it noted.
It said that once the euphoria over the Tory win subsides, “the USD and Federal Reserve rate hike expectations may decide whether cable can build on the gains or retreats below 1.50”.
SocGen economists forecast a first rate hike in the first quarter of 2016 under another Conservative government.