- Pound Exchange Rate Recovers Before Vote – EU referendum uncertainty to drive GBP, EUR, USD exchange rates
- Euro Exchange Rates to Struggle on Demand for Bonds – Safe-haven demand to push bond prices higher and yields lower
- US Dollar Predicted to Advance on Risk-Off Trade – Brexit jitters to cause equity markets to fluctuate
- Brexit Debate to Dominate Trader Focus – Investors likely to be highly reactionary to any referendum developments
UK Brexits, Pound, Euro, US Dollar Exchange Rates in Turmoil
With the UK voting to leave the EU, Pound (GBP) exchange rates plummeted across the board.
The Pound dropped to a low of 1.20 against the Euro before recovering to 1.23 while GBP/USD hit 1.34 and its lowest levels since 1985.
Stick with us for the latest news as the day continues.
(Previously updated 24/06/2016)
UK Takes to the Polls – What Next for GBP, EUR, USD Exchange Rates?
The EU referendum is finally upon us and as Britons take to the polls the Pound has dipped against both the Euro and US Dollar.
Although bookies odds favour a vote to remain, last minute jitters that the UK could actually vote to Brexit are keeping GBP pressured.
The latest polls have certainly been tight, with the majority deeming the outcome too close to call.
The GBP/EUR exchange rate is currently trending in the region of 1.3022 while the GBP/USD exchange rate trades in the region of 1.4757.
The latest polls have been mixed, with the latest YouGov poll giving Remain a lead while the TNS poll put Leave ever-so-slightly ahead.
TNS said of the data: ‘Our latest poll suggests that Leave is in a stronger position than Remain but it should be noted that in the Scottish Independence Referendum and the 1995 Quebec Independence Referendum there was a late swing to the status quo and it is possible that the same will happen here.’
(Previously updated 22/06/2016)
Pound Trims Gains Vs Euro and US Dollar Today
After soaring to a five-month high against the US Dollar and pushing beyond the 1.30 level against the Euro earlier in the week, the Pound trimmed gains against its major rivals as investors focused on tomorrow’s EU referendum.
Months of speculation and volatility will culminate in the UK populace taking to the polls and deciding whether the UK will Brexit or Bremain.
Whatever the outcome of the vote, significant currency market volatility is likely to occur and we expect further fluctuations to take place today as last minute campaigning has an impact.
The Pound Euro exchange rate is currently trending in the region of 1.3005.
The Pound US Dollar exchange rate is currently trending in the region of 1.4656.
With ecostats limited, and those scheduled for publication not likely to have much of an impact in light of the focus on the referendum, Pound movement is being wholly dictated by the latest referendum reports.
(Previously updated 21/06/2016)
GBP, EUR, USD Exchange Rates Fail to Respond to Data Releases
With the UK’s EU referendum only days away and support for the ‘Remain’ campaign growing, the Pound was able to consolidate and extend previous gains against both the Euro and US Dollar.
The ZEW Economic Sentiment Surveys for both Germany and the Eurozone may have exceeded forecasts, but with Brexit bets driving market movement the reports’ impact on GBP, EUR, USD exchange rates was minimal.
Germany’s sentiment gauge improved from 6.4 to 19.2 while the Eurozone’s index rallied from 16.8 to 20.2.
The Pound Euro exchange rate was trending in the region of 1.3032 having climbed around 0.6% during the European session.
The GBP USD exchange rate cooled from intraday highs, however, as traders took advantage of the US Dollar’s comparatively low trade weighting.
(Previously updated 20/06/2016)
The greatest impact of the EU referendum and the accompanying cloud of uncertainty on currency exchange has been felt by the GBP, EUR, USD exchange rates, with the Pound experiencing significant movement against its major rivals. This has been evident in the massive price swings, with volatility levels having already surpassed that of the financial crash.
On Monday, the Pound surged by over 1% against both the Euro and US Dollar as investors responded to increased support for the ‘Remain’ campaign.
The GBP EUR exchange rate rallied to a high of 1.2936 while the GBP USD exchange rate achieved 1.4673. Given that the Pound was in the doldrums against the majority of its peers for much of last week, this is a significant turn around in the currency’s fortunes. Whether or not this uptrend lasts remains to be seen.
The Pound was also able to gain on the commodity currencies, the Australian Dollar, New Zealand Dollar and Canadian Dollar.
While the latest polls are indicating that the UK may vote to remain part of the European Union on Thursday, this campaign has shown how quickly opinions can change and the result is far from certain.
However, should support for the ‘Remain’ campaign continue to increase over the next few days, we could see the GBP EUR USD exchange rates experiencing further volatility – with new Pound highs possible.
Several prominent business officials, including representatives from major car manufacturing firms, have come out in support of a ‘Remain’ vote.
Pound Sterling (GBP) Exchange Rate Forecast: How Will the EU Referendum Shape Exchange Rates?
Predicting Sterling exchange rate movement has become increasingly difficult in the run-up to the June 23rd EU referendum.
This week there is a high potential for volatility to reach levels never yet seen, especially with fickle traders become ever-more reactionary to EU referendum developments.
Given that EU referendum campaigning was suspended at the close of last week, following the shocking and tragic murder of British MP Jo Cox, the resumption of the debate is likely to lead to increased market fluctuations.
‘I still think in the last few sessions ahead of the Brexit vote that we are in for a huge amount of volatility, that Sterling is still highly vulnerable as are all risky assets,’ said Jane Foley, a senior currency strategist. ‘Whilst there had been an appearance of some sort of relief rally when campaigning had been suspended, the vote could still go either way.’
Although the Pound has lost significant value in the face of uncertainty, and is set to decline further this week, the markets have not yet fully priced in a Brexit.
This could see a massive Sterling depreciation if the EU referendum results in a ‘Leave’ victory because it suggests that many economists are still confident the UK will vote to remain in the EU.
‘If you do see uncertainty, that typically will drive voters to the status quo,’ said Karl Schamotta, director of foreign-exchange research and strategy at Cambridge Global Payments. ‘We’re seeing a trade that’s entirely too crowded — at the end of the day, the market expectation remains that we will see a stay vote.’
EU Referendum Uncertainty to Negatively Impact Bond Yields, GBP, EUR, USD Exchange Rates to Fluctuate
Although EU referendum uncertainty hasn’t had as direct an impact on the Euro as has been seen with Sterling, one of the major outcomes has been increased demand for safe-haven assets.
This has caused developed market bonds, in particular German 10-year bunds, to rally. When bond prices rise, yields decline.
German bonds are forecast to advance further this week as we draw ever closer to the EU referendum vote. This is not a desirable outcome for the European Central Bank (ECB) as there are already limited assets to purchase.
‘The drop in yields has revived talk about the European Central Bank likely facing constraints in its bond-purchase program, which is set to run until March 2017 at a pace of about 80 billion euros ($90 billion) per month,’ wrote Marianna Aragão for Bloomberg.
Should EU referendum jitters also prove to have negatively impacted the German ZEW Economic Sentiment Survey on Tuesday, the Euro is set to endure marked losses this week.
US Dollar (USD) Exchange Rate Forecast to Advance as EU Referendum Uncertainty Causes Risk-Off Trade
The EU referendum debate has also certainly had an impact on the US Dollar.
Despite the fact that Federal Reserve Chairwoman Janet Yellen delivered a somewhat dovish speech following the most recent interest rate decision, and irrespective of domestic ecostats showing inflation had fallen, the US Dollar has held a comparatively high trade weighting.
This has been thanks to the combination of Euro weakness and increased demand for safe-haven assets.
The dark cloud of uncertainty hanging over markets in the face of the UK’s EU referendum vote has been felt globally, with safe-haven assets such as gold rising in value exponentially.
Bloomberg’s Luzi-Ann Javier wrote; ‘The turbulence sweeping global markets has reignited investors’ passion for gold. Global central bankers have sounded the alarm that a British exit from the European Union could be disruptive to the global economy. Anxiety about the June 23 vote contributed to more than $1 trillion of value being wiped from global equities last week as bullion futures reached the highest in almost two years. Hedge funds are holding the second-biggest bet ever that the metal will rally further, falling just short of a record reached in 2011.’
So the Pound is set to see massive price-swings, the Euro is forecast to decline and the US Dollar is predicted to advance. The only certainty, however, is that the EU referendum debate and outcome will be the main driver of FX market movement this week.