- Polls Increase Downward Pressure on Sterling – Latest opinion poll shows further swing towards ‘Brexit’.
- Pound Monthly Volatility Reaches 28% – Short term volatility sees unprecedented levels.
- European Stock Market Slides – Doubt and uncertainty surrounding the UK referendum now spilling into other markets.
- All eyes on Bank of England to Stem ‘Brexit’ Panic – Extra operations and an upcoming rate announcement could shift market sentiment.
Pound Euro Exchange Rate Trends Higher Today on UK Jobs Data
A lower-than-expected UK unemployment rate and stronger-than-forecast average earnings figures gave the Pound Euro exchange rate a boost on Wednesday, with the British currency advancing to a high of 1.2670 against its European rival.
The Pound was also able to gain on the US Dollar thanks to the upbeat jobs news.
According to The Telegraph: ‘unemployment in the UK has dropped to the lowest levels witnessed in more than a decade, as the strength of hiring helped to push up pay growth. The unemployment rate slid to 5% in the quarter to April, according to the Office for National Statistics (ONS). The fall came as a surprise to economists, who had anticipated that the jobless rate would remain unchanged at 5.1%.’
Although the Pound Euro exchange rate trimmed its initial gains as the European session continued, the pairing remains up on the two-month low struck earlier in the week.
This evening’s Federal Open Market Committee (FOMC) interest rate decision could have an impact on GBP/EUR trading ahead of tomorrow’s Bank of England (BoE) interest rate decision.
If the central bank is dovish in its outlook for US interest rates it could push the US Dollar lower. As EUR/USD is the world’s most-traded currency pairing this could have the effect of driving the Euro higher against other peers like the Pound.
(Previously updated 08:00 15/06/2016)
While the Pound Euro (GBP/EUR) exchange rate has recovered slightly from the lows hit on Monday, the pairing remains under considerable pressure and has the potential to slide in the hours ahead.
Yesterday saw more depreciation for the Pound as it struggled under a mounting pro-‘Brexit’ outlook, exacerbated by the latest polls and the UK’s Sun newspaper coming out in support of a ‘Brexit’.
Also on Tuesday we saw the interest rates for the UK Government’s debt slide considerably, a possible sign of investor panic as they load into safe assets.
The Pound has been hard-done-by lately and polls continue to batter the UK currency as its struggles to pick itself up against the Euro.
As markets reopened after the weekend, the delayed impact of the ORB’s latest poll gutted GBP and left the currency lower across the board.
Yesterday saw the Pound recover some of its losses against the Euro as the European Court of Justice’s decision to let the UK limit migrant child benefits lent GBP some support. A negative judgement would’ve increased favour with the ‘Leave’ camp.
Bank of England (BoE) Starts Pre-Vote Extra Liquidity Operations
The Pound Euro rate could well see some relief today as the Bank of England made moves to insure UK banks will have enough money in the face of a UK ‘Brexit’. As illiquid asset trade slows in the run up to the referendum, increased trading of currencies has prompted possible fears of the banks running out of capital.
With the odds of a ‘Brexit’ being increased by bookmakers as polls reflect increasing anti-EU sentiment, the Pound only continues in its downtrend.
Positive Eurozone Reports Overshadowed by Referendum-based Eurostock Slide
Yesterday saw the Euro depreciate against a number of the majors as ‘Brexit’-induced risk had an impact on the European stock market.
Falling stocks and commodity prices world-wide have pushed investors towards the US Dollar as safe-haven demand remains high within the market. Risks associated with the UK’s EU referendum have had the largest impact on the single currency however, and this should generally increase as the June 23rd date of the vote draws nearer.
Eurozone data did afford a small boost to the Euro as industrial production reached a healthy 2.0%, smashing the expected 1.4%.
GBP/EUR Forecast: Announcements from BoE and ECB set to Shift Market Sentiment
Later this morning we will see the release of the UK’s average weekly earnings report and employment change data. Both are medium impact releases but carry the possibility of causing movement for the Pound if figures exceed or fall short of expectations. Movement would be assumed to be marginal as the Pound has almost decoupled itself from domestic data in the wake of the upcoming referendum.
Eyes will be on the Bank of England tomorrow as the decidedly pro-‘Remain’ organisation is expected to announce it will be holding its benchmark interests rates at 0.5%. The lack of rate change itself is unlikely to shake up markets but analysts will be paying close attention to the rhetoric used to discern a hawkish or dovish stance from the BoE.
The Pound’s recent volatility is likely to remain until we have ridden out the storm of the referendum.
Little is on offer from Europe in regards to impactful data. A small strengthening of the Eurozone economy may be afforded if tomorrow’s inflation data hits forecast figures. The European Central Bank is due to release its economic bulletin on Thursday as well. The minutes will be scrutinised to divine the central bank’s prevailing bearish or bullish outlook.