As Britain nears its vote to leave the EU, several new warnings have appeared urging voters to vote against an exit. While several politicians, economists, and financial chiefs have attempted to deter voters from voting to split from the EU in recent months, new warnings in recent days have cast aspersions on the UK’s ability to go it alone economically.
The BBC reported a 0.2% decline against the U.S. dollar, a 0.6% decline against the euro, and a 1% decline against the Japanese yen in recent trading, while noting volatility has increased in recent days.
The volatility index, which saw double-digit gains on Monday, is also partly a result of worldwide equity declines. It's driven by falling currency reserves in China, declining labor market strength in the United States, and stubborn weakness in Europe.
At the same time, new data from the EU is pointing to a possible turnaround. EU agency, Eurostat, released a new study that says the Eurozone saw 1.7% year-over-year growth in the 1st quarter of 2016, driven by renewed consumer confidence and business investment. Household spending was a key driver of growth.
That represents a 0.6% quarterly growth rate, which was Eurostat’s initial estimate. That was afterwards revised to 0.5%, but has now been revised again upwards.
The data was largely expected from analysts, who noted that easy comparables from the prior year and renewed competitiveness due to a strong U.S. dollar had been driving European growth at the end of 2015 and into this year. However, some analysts also warned that global uncertainties remained an economic threat to the EU, and that growth could still slowdown in the second quarter.
Despite the renewed numbers, markets see continued weakness in Europe and in the UK, as bond yields fell to a record low in Germany. The 10-year German bond fell to 0.027%, and is approaching negative yields. American bonds fell to 1.671%, near their record lows.
The fact that American bonds also declined suggests that a Brexit, which has had a minimal impact on American markets, may not be the only source of weakness in European bond markets. Analysts note that Europe’s continued quantitative easing program has failed to raise interest rates as low inflation persists, and weak employment data in the U.S. is causing bond traders to be more pessimistic.
Nonetheless, both the BBC and other news outlets note the fall in bond yields could be driven by fears of the UK voting to leave the European block of nations. The UK saw its 10-year bond fall to its lowest yield in history, at 1.249%.
Meanwhile, a new report from the National Institute of Economic and Social Research warns that the poor in the UK could be hit hard by a Brexit. Their study shows that households dependent on government assistance could lose “up to £2,771 a year” in income.
The Vote Leave interest group, which supports a Brexit, has dismissed the assumptions in the NIESR’s report.