- UK currency previously rallied on polling news – PM’s intervention met with mixed reception
- Euro hits the rocks on Draghi comments – ECB President’s boilerplate fails to reassure investors
- US Dollar stages a recovery – Fed Chair’s cautious comments meet with expectations
- ECB contributions expected today – Further Fed comments also incoming
With the EU referendum vote fast approaching the Pound (GBP) was able to strengthen to 1.30 against the Euro (EUR) and achieve a five-month high against the US Dollar (USD). Although the currency has since trimmed some if its gains, it remains notably stronger than this time last week.
This is largely due to a complete turnaround in expectations regarding the likely outcome of the historic referendum. While previous polls put ‘Leave’ ahead, it now seems that ‘Remain’ has pushed ahead.
The Pound has been a safe bet for investors in recent days, thanks to a great deal of support being offered by the latest EU Referendum polls.
The Euro has flopped for the most part, owing to concerns that the European Central Bank (ECB) may not be able to cope with a ‘Brexit’.
The US Dollar has righted itself since the start of the week, on the back of predicted comments from Federal Reserve Chair Janet Yellen.
UK Economic News: Pound Remains Dominant despite Dip Following Last-Minute Intervention by PM
The appeal of the Pound against the Euro and the US Dollar, along with most other peers, remained high yesterday, thanks to a sustained positive reaction to Monday’s opening EU Referendum polls that put ‘Remain’ in the lead.
Since then, Sterling has taken a few knocks, particularly on account of profit-taking by investors after the UK currency hit historic highs against many of its rivals.
Another source of harm for the UK currency came from within, when despite Prime Minister David Cameron’s plea for voters to choose ‘In’ on Thursday being well-intentioned, the Pound dipped slightly in response.
Also damaging the Pound’s prospects was an opinion poll from Survation, which put the Remain campaign’s chances of victory at 45% and the Leave’s group’s odds at 44%.
Euro Slides on Market Concerns while US Dollar Climbs after Fed Comments
The appeal of the single currency took a hit yesterday, owing partly to words from Mario Draghi. Speaking to the European Parliament, the policymaker said on ‘Brexit’ that:
‘We will closely monitor the evolution of the outlook for price stability. We stand ready to act by using all the instruments available within our mandate, if necessary, to achieve our objective. In particular, the ECB is ready for all contingencies following the UK’s EU referendum’.
Although this comment was likely intended to reassure investors, the fact that it essentially duplicated the content of previous statements on monetary policy did little to drive the message home.
In the US, the ‘Buck’ underwent a miraculous recovery from Monday to Tuesday, having been restored in the estimation of investors by the fact that Fed Chair Janet Yellen did not deviate from her ‘script’ during her first day of testimony to the Senate Banking Committee.
Yellen’s comments on interest rate decisions and the possible impacts of ‘Brexit’ were largely factored in beforehand by investors, as owing to the restrictive circumstances (no major improvements in the US economy and the fact that the ‘Brexit’ vote is still to come), the policymaker had little choice but to repeat the plan of action of ‘slow and steady’ observation of the global market situation.
Future GBP, EUR, USD Forecast: Further Yellen Testimony and Eurozone Data due before UK Referendum Vote
Today does not have any forecast UK data releases to come, therefore the Pound’s only source of movement is likely to be investor sentiment on the odds of a ‘Brexit’ or ‘Remain’ vote being the strongest.
Any last-minute speeches or arguments may be ignored owing to their proximity to the Referendum vote itself, therefore the only force expected to shift opinions will be eve-of-referendum polls.
From the Eurozone, the European Central Bank (ECB) will be holding a non-monetary policy meeting shortly, while later on in the morning, Portugal’s pessimistically predicted April current account results will be announced. Closing off the day for Euro movement will be the mid-afternoon June Eurozone consumer confidence flash, which is forecast to worsen from -7 to -7.4.
For the US, influence will be had by a speech by Fed Vice Chair Stanley Fischer in the afternoon, as well as from the second session of Yellen’s testimony.
Also of note for the US tomorrow will be mixed-forecast existing home sales stats for May and crude oil and gasoline inventories for the previous week.
Recent GBP, EUR, USD Exchange Rates
The Pound Sterling to Euro (GBP/EUR) exchange rate has been trending in the region of 1.3057 and the Euro to Pound Sterling (EUR/GBP) exchange rate has been trending in the region of 0.7661 recently.
The Pound Sterling to US Dollar (GBP/USD) exchange rate has been trending in the region of 1.4695 and the US Dollar to Pound Sterling (USD/GBP) exchange rate has been trending in the region of 0.6806 recently.
The Euro to US Dollar (EUR/USD) exchange rate has been trending in the region of 1.1255 and the US Dollar to Euro (USD/EUR) exchange rate has been trending in the region of 0.8888 lately.