1
00:00:00,760 --> 00:00:07,280
Speaker 1: The Brexit vote coverage on Bloomberg Radio Brexit Latest, Paul

2
00:00:07,400 --> 00:00:12,799
Speaker 1: suggests that perhaps the Remain vote has just barely edged

3
00:00:12,920 --> 00:00:16,159
Speaker 1: out the Leave vote. In fact, Nicholas Frost, who has

4
00:00:16,200 --> 00:00:18,599
Speaker 1: been one of the leading voices saying that UK should

5
00:00:18,880 --> 00:00:21,720
Speaker 1: exit the European Union, is conceding that it looks like

6
00:00:21,800 --> 00:00:25,560
Speaker 1: the vote to remain is just barely winning the day.

7
00:00:25,640 --> 00:00:28,480
Speaker 1: Well Mark Chandler joins us now here on taking stock

8
00:00:28,520 --> 00:00:31,440
Speaker 1: on Bloomberg Radio. He's global head of currency strategy at

9
00:00:31,520 --> 00:00:36,320
Speaker 1: Brown Brothers. Haraman. So, Mark, I guess at the very

10
00:00:36,400 --> 00:00:39,159
Speaker 1: least we can figure if if it's just if this

11
00:00:39,200 --> 00:00:42,640
Speaker 1: is overheading, that the pound sterling, which has already had

12
00:00:42,680 --> 00:00:47,040
Speaker 1: a pretty good move higher, should continue to do so, Daniel,

13
00:00:47,080 --> 00:00:48,960
Speaker 1: I think, Kathleen, that would be the sort of the

14
00:00:49,040 --> 00:00:51,959
Speaker 1: knee jerk reaction in the sense that the British looked

15
00:00:52,040 --> 00:00:54,640
Speaker 1: very close to coining the polls and then the very

16
00:00:54,720 --> 00:00:57,520
Speaker 1: last minute, like what Winston Churchill said about Americans once,

17
00:00:57,800 --> 00:00:59,720
Speaker 1: he said, you can always kind of America to do

18
00:00:59,720 --> 00:01:02,960
Speaker 1: the right thing after they've exhausted the alternatives, and so

19
00:01:03,040 --> 00:01:05,360
Speaker 1: here the UK last minute, they're gonna do the right thing.

20
00:01:05,400 --> 00:01:07,319
Speaker 1: It looks like but I want to say that the market,

21
00:01:08,000 --> 00:01:11,000
Speaker 1: and I'm pricing this in for about a week now.

22
00:01:11,240 --> 00:01:15,520
Speaker 1: Sterling last Thursday was treading almost at one point four

23
00:01:15,720 --> 00:01:18,960
Speaker 1: zero against the dollar, and just now we tested one

24
00:01:18,959 --> 00:01:22,039
Speaker 1: point five. This is a very large move and I

25
00:01:22,040 --> 00:01:24,160
Speaker 1: think this is I try to make a distinction between

26
00:01:24,160 --> 00:01:28,600
Speaker 1: fast money, the leverage community hedge fund speculators in the

27
00:01:28,680 --> 00:01:32,840
Speaker 1: futures market. These people have been already buying sterling and

28
00:01:32,920 --> 00:01:35,040
Speaker 1: by when the slow money, which are the people who

29
00:01:35,080 --> 00:01:38,119
Speaker 1: are managing our pension funds, retirement money. We want them

30
00:01:38,120 --> 00:01:40,759
Speaker 1: to be taking considered views. We wanted them to take

31
00:01:40,800 --> 00:01:44,160
Speaker 1: off risk ahead of this great unknown, and so they

32
00:01:44,200 --> 00:01:46,840
Speaker 1: will be slower to return into the markets than these

33
00:01:46,880 --> 00:01:50,720
Speaker 1: hedge funds and these leverage community people. Mark Chandler, what

34
00:01:50,840 --> 00:01:52,600
Speaker 1: if you could tell me a little bit about the

35
00:01:52,680 --> 00:01:56,200
Speaker 1: yen in the context of the EU referendum in Britain,

36
00:01:56,320 --> 00:02:00,600
Speaker 1: Because the end is dropping right now as describe a

37
00:02:00,680 --> 00:02:05,360
Speaker 1: haven demand declines down about the half a percent. Yeah,

38
00:02:05,400 --> 00:02:06,880
Speaker 1: you know, DA mean, I think you're right. You know,

39
00:02:07,400 --> 00:02:10,400
Speaker 1: I think people like media have underestimated for how long

40
00:02:10,720 --> 00:02:13,120
Speaker 1: the referendum has been hanging over the market's head. This

41
00:02:13,280 --> 00:02:15,720
Speaker 1: is one of the factors that if the uncertainty, it

42
00:02:15,720 --> 00:02:18,799
Speaker 1: seems to be one of the factors they encouraged. This

43
00:02:18,919 --> 00:02:21,079
Speaker 1: is a great strength of the yen, and now it's

44
00:02:21,120 --> 00:02:24,160
Speaker 1: being unwound. So the dollar and the yen are both

45
00:02:24,200 --> 00:02:28,080
Speaker 1: weakening against all the major currencies and all the emerging

46
00:02:28,120 --> 00:02:32,160
Speaker 1: market currencies. Well, if you're Mr Corona, governor of the

47
00:02:32,160 --> 00:02:34,799
Speaker 1: Bank in Japan, you're very happy to see this, right.

48
00:02:34,840 --> 00:02:38,080
Speaker 1: And of course central banks were uh letting us know

49
00:02:38,160 --> 00:02:40,720
Speaker 1: that they were ready to step into currency markets if

50
00:02:40,760 --> 00:02:43,280
Speaker 1: the Brexit vote passed, the pound got hammered. If the

51
00:02:43,440 --> 00:02:45,160
Speaker 1: end serves so, I guess they can just all sit

52
00:02:45,200 --> 00:02:47,840
Speaker 1: back now and you know, have their dinner or go

53
00:02:47,880 --> 00:02:51,080
Speaker 1: to bed. Mark. Uh. Where does this leave if the

54
00:02:51,160 --> 00:02:54,519
Speaker 1: if the if the Brexit vote is defeated, Uh, then

55
00:02:54,680 --> 00:02:58,760
Speaker 1: is it just a repricing back to uh where we

56
00:02:58,760 --> 00:03:03,079
Speaker 1: were before bregg really heated up. I think it was

57
00:03:03,160 --> 00:03:05,639
Speaker 1: in some ways Keting right. To beyond that, I think

58
00:03:05,639 --> 00:03:08,679
Speaker 1: that the for example, the Setial Reserve has stided the

59
00:03:08,720 --> 00:03:12,920
Speaker 1: Directxit as one of the things leading to the international uncertainty,

60
00:03:13,240 --> 00:03:15,440
Speaker 1: and they would if I had to make a like

61
00:03:15,520 --> 00:03:18,120
Speaker 1: a little like a list of the stactors, they would

62
00:03:18,120 --> 00:03:20,960
Speaker 1: get the settle reserve to move sooner rather than later.

63
00:03:21,320 --> 00:03:23,400
Speaker 1: I'd say a rote with the UK stays in the

64
00:03:23,440 --> 00:03:27,120
Speaker 1: EU and the global capital markets UH, do not go,

65
00:03:27,320 --> 00:03:30,160
Speaker 1: do not become unstable, especially on the downside. It seems

66
00:03:30,160 --> 00:03:34,320
Speaker 1: like officials like us with the investors, we prefer volatility

67
00:03:34,480 --> 00:03:39,560
Speaker 1: upside rather than the downside. One consequence is federal reserve policy.

68
00:03:39,720 --> 00:03:41,920
Speaker 1: You want you imagine that you want volatility to move

69
00:03:42,400 --> 00:03:44,320
Speaker 1: to the upside, all right, Well, you get people more

70
00:03:44,360 --> 00:03:47,720
Speaker 1: excited and interested in in in trading. Um. One person

71
00:03:47,760 --> 00:03:50,160
Speaker 1: I imagine who was interested, of course in the results

72
00:03:50,240 --> 00:03:53,680
Speaker 1: is Prime Minister David Cameron. Didn't he try to change

73
00:03:54,280 --> 00:03:57,600
Speaker 1: and to some extent he did change the rules for

74
00:03:58,040 --> 00:04:02,040
Speaker 1: UK United Kingdom's membership in the European Union, for example

75
00:04:02,360 --> 00:04:05,520
Speaker 1: things having to do with migrant welfare payments, but also

76
00:04:06,040 --> 00:04:10,320
Speaker 1: UH protection for the City of London, the financial services industry.

77
00:04:10,680 --> 00:04:12,560
Speaker 1: I think that the best thing that the UK has

78
00:04:12,600 --> 00:04:16,320
Speaker 1: done for this financial service industry is to if this

79
00:04:16,360 --> 00:04:18,680
Speaker 1: is the case, to vote inside to stay in in

80
00:04:18,720 --> 00:04:21,599
Speaker 1: the EU. I think that the for me, I think

81
00:04:21,600 --> 00:04:23,640
Speaker 1: that there's still going to be a circle problem for Cameron.

82
00:04:23,960 --> 00:04:25,920
Speaker 1: He had thought that the left in London was going

83
00:04:25,960 --> 00:04:29,680
Speaker 1: to dream the Tory Party back together, but instead just

84
00:04:30,120 --> 00:04:33,120
Speaker 1: thinking about the tone and the Uh. It seems to

85
00:04:33,160 --> 00:04:35,520
Speaker 1: me that zal the Tory Party apart and it won't

86
00:04:35,520 --> 00:04:39,640
Speaker 1: surprise me then as Cameron faces a leadership challenge still

87
00:04:39,720 --> 00:04:43,200
Speaker 1: later this year, and Osborne, who has delivered a budget

88
00:04:43,200 --> 00:04:46,159
Speaker 1: that was quickly rejected and then came up with like

89
00:04:46,800 --> 00:04:49,560
Speaker 1: a gap budget in case of Blexit, I think he

90
00:04:49,640 --> 00:04:52,360
Speaker 1: might end up leaving, having to leave the champ of Exchequer,

91
00:04:52,360 --> 00:04:54,280
Speaker 1: which is sort of like the U S. Treasury Secretary.

92
00:04:54,520 --> 00:04:56,320
Speaker 1: So I still think that the politics in the UK

93
00:04:56,640 --> 00:04:59,039
Speaker 1: not resolved, and the market is probably gonna have to

94
00:04:59,080 --> 00:05:02,039
Speaker 1: overshoot now and this aren't really going to be good

95
00:05:02,120 --> 00:05:05,680
Speaker 1: levels for to be chasing the market, I think in

96
00:05:05,800 --> 00:05:09,000
Speaker 1: terms of this move, uh, the yen um, you know,

97
00:05:09,000 --> 00:05:13,400
Speaker 1: pulling back from the highs, the dollar rising, Will this continue?

98
00:05:13,400 --> 00:05:16,400
Speaker 1: Will because the dollar keep rising absent another industrate increase

99
00:05:16,440 --> 00:05:19,360
Speaker 1: in the FED, I think? So I think that's the

100
00:05:19,360 --> 00:05:21,360
Speaker 1: global market stabilized. I think one of the pressures on

101
00:05:21,440 --> 00:05:23,800
Speaker 1: the yen, you know. I look at the capital flows

102
00:05:23,839 --> 00:05:28,120
Speaker 1: and it's interesting. Uh. Bloomberg tracks the weekly data from

103
00:05:28,120 --> 00:05:30,800
Speaker 1: the Ministry of Finance and last week that is the

104
00:05:30,880 --> 00:05:33,160
Speaker 1: data that came out earlier today in the US would

105
00:05:33,160 --> 00:05:36,680
Speaker 1: be Thursday. Uh, I'm sorry, yeah, Thursday morning in the US,

106
00:05:36,800 --> 00:05:39,680
Speaker 1: the Japanese recorded for the first week since the end

107
00:05:39,720 --> 00:05:44,200
Speaker 1: of March, foreigners did not buy Japanese bonds and and

108
00:05:44,240 --> 00:05:46,200
Speaker 1: so I look at these flows, and so where's this

109
00:05:46,279 --> 00:05:48,320
Speaker 1: big demand from end coming from. It's not only the

110
00:05:48,320 --> 00:05:51,840
Speaker 1: portfolio flows. Yeah, speculators are long end, but it's not

111
00:05:51,880 --> 00:05:54,839
Speaker 1: really it's not really inside it really would move the

112
00:05:54,880 --> 00:05:57,880
Speaker 1: spot market necessarily. It seems to me that the Japanese

113
00:05:57,880 --> 00:06:02,680
Speaker 1: themselves repatriating, So was the profits and dividends or hedgings.

114
00:06:03,040 --> 00:06:05,520
Speaker 1: I saw one essiment that suggested that Japanese companies can

115
00:06:05,560 --> 00:06:09,200
Speaker 1: have as much as UH five hundreds a billion dollars

116
00:06:09,240 --> 00:06:13,400
Speaker 1: in overseas earnings a B thanks very much, Mark Chandler,

117
00:06:13,480 --> 00:06:16,719
Speaker 1: Global head of Currency Strategy of Brown Brothers Harriman. More

118
00:06:16,800 --> 00:06:18,800
Speaker 1: coverage of Brexit continues