Germany warns Brexit could start ‘disintegration’ of EU

The engineering giant wrote a letter to its employees warning that a British exit, or Brexit, would be bad for business.

Gold turned lower on Thursday, as sterling bounced higher and US stock markets came well off their lows following the suspension of Britain’s campaign for next week’s referendum after a member of Parliament was shot dead.

Finance Minister Bill Morneau.

The telephone study by Ipsos MORI also reveals widespread distrust of the Government’s scaremongering campaign, with just a week to go before the European Union (EU) referendum.

The dollar though trimmed its losses against the yen after a strong USA retail sales report for May, although the data did little to increase the odds of an interest rate hike by the Federal Reserve in the summer. Likewise, the Swiss National Bank left its rates unchanged.

“A few days ago I already pointed out what an exit would mean”, said Merkel, “that everything related to the common market, and to the mutual benefit to Britain and all other European member states, would no longer be available to Britain”. The euro edged down to $1.1205 from $1.1293.

Fed Chair Janet Yellen underlined the significance of the Brexit referendum, saying: “It is a decision that could have consequences for economic and financial conditions in global financial markets”.

Ferdinand Fichtner, the head of economic policy at DIW added (roughly translated from the original German): “In addition, the Brexit referendum discussion is responsible for a lot of uncertainty”. Swiss banks are also at high risk of turbulence.

The Canadian companies that set up shop in Britain did so on the assumption that they were setting up in the European Union and had access to that market, Morneau noted.

“The rising tide of volatility has lifted all boats, making hedging sterling risks via proxy currencies or surrogates very, very expensive”, said Shaun Osborne, chief currency strategist ScotiaBank in Toronto.

“Expect drastic volatility around this vote, and if it does in fact happen look for more countries to leave the European Union as well”, said Tom di Galoma, a bond trader and managing director at Seaport Global, in an email. “If anything, the central bank should reiterate its readiness to act in the case of any negative developments (after the vote)”.

“A vote to leave the European Union could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy”, the bank said as its members voted to keep its lending rate unchanged.