THE TAKEAWAY: PM Cameron announces a UK referendum on EU membership -> Cameron says the referendum will take place in the next parliament, after treaty negotiations -> Sterling trading slightly higher

UK Prime Minister David Cameron announced this morning that in the first half of the next parliament a referendum will be held on the UK membership in the European Union. The announced referendum will take place only after the UK has had a chance to negotiate treaty changes with other EU members. Cameron said that the EU treaty must be changed and he thinks the EU will be a very different body following the end of the Euro debt crisis.

Cameron was optimistic about the chance of success of making changes to the EU treaty, and said that Britain is better off in a changed EU than out of the union. On the other side, Cameron said that if the UK left the European Union, it would be a one way ticket.

The prime minister said UK public disillusionment with the EU is at an all time high, and treaty changes should be made to allow powers to return to individual states. Cameron mentioned some of the issues he would like to see addressed in the treaty changes; he wants completing the single market to be the EU’s driving mission. Additionally, Cameron called for a leaner and less bureaucratic EU.

Some analysts have said that a UK withdrawal from the European Union would be bad for the British economy, and possibly Sterling negative. However, the British Pound rose from session lows as Cameron spoke about the possible referendum. His call for a referendum after the next elections was expected by commentators writing ahead of the speech, and the Pound strength may have been a reaction to Cameron’s optimism for treaty changes.

GBPUSD is trading slightly below 1.5850 in currency markets at the time of this writing. Support could be provided by a four month low at 1.5823, and resistance could be provided by the key 1.6000 figure.

GBPUSD Daily: January 123, 2013

Sterling_Rises_as_PM_Cameron_Announces_a_Referendum_on_EU_Membership_body_gbpusd.png, Forex News: Sterling Rises as PM Cameron Announces a Referendum on EU Membership

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to .