- Opinion Polls Continue to Drive Pound (GBP) Movement – GBP suffers at the hands of further opinion polls.
- Eurozone sees ‘Brexit’-Based Fallout – European stock market falls significantly due to uncertain atmosphere surrounding the referendum.
- Traders Increase Short Positions on Pound – Potential further devaluing of GBP expected, traders double down on bets.
- Bank of England Forecast To Keep Rates Unchanged – Eyes will be on ‘Brexit’-averse BoE to temper market sentiment.
Pound Boosted by UK Jobs Data
During Wednesday’s European session the Pound Euro exchange rate charged higher thanks to the release of better-than-forecast UK jobs data.
A lower than expected unemployment reading and upbeat average earnings numbers gave Sterling a well-timed boost against the majority of its most-traded counterparts.
The data prompted this response from Stephen Crabb, Secretary of State for Work and Pensions: ‘There are more people in work than ever before and wages are continuing their upward climb, which is great news for hardworking families who have seen a rise in their living standards over the past year. Our economic plan is delivering jobs and security right across the UK.’
GBP/EUR hit a high of 1.2670.
Tomorrow’s Bank of England (BoE) interest rate decision could have an impact on Pound Euro trading, particularly if the central bank issues further warnings regarding the potentially negative impact of a ‘Brexit’.
Before that the Federal Open Market Committee will be delivering its interest rate announcement and triggering currency-market movement in the process.
(Previously updated 17:20 14/06/2016)
GBP/EUR Bounced Back to 1.26
The Pound Sterling to Euro (GBP/EUR) exchange rate recovered from a low of 1.2533 to trend in the region of 1.2614 as Tuesday continued.
Sterling was able to gain on its European counterpart despite the UK’s latest inflation report failing to show the increase in consumer price gains forecast by economists.
The Eurozone’s industrial production report also exceeded estimates.
However, with the latest referendum poll results showing increased support for the ‘Leave’ campaign, the Pound could experience a sharp reversal in fortunes before the close of trade.
The Sun, the most widely read UK newspaper, also came out in support of the ‘Leave’ camp. Given the publication’s extensive readership, it’s possible that the development could increase support for a ‘Brexit’.
Wednesday’s UK employment figures could also have an impact on GBP/EUR exchange rate trading.
If the rate of average earnings declines as expected it could put the Pound under pressure, potentially pushing the British currency back to its recent two-month low against the Euro.
However, an unexpectedly positive result could lend GBP support.
(Previously updated 08:30 14/06/2016)
The Pound to Euro (GBP/EUR) exchange rate slid once more as the markets opened on Monday morning while gaining slightly after the release of another ‘Brexit’ opinion poll showed the vote to be too close to call.
During the weekend another release in the seemingly never ending torrent of polls suggest that the UK’s ‘Leave’ campaign has edged 10 points ahead of ‘Remain’, a change from previous polls claiming a neck and neck race. Due to this the Pound saw an average drop of approximately 0.5% across the board yesterday morning.
From the beginning of the year the Pound has dropped over 4%, seeing its biggest slide last Friday since the date of the referendum was announced in February.
Throughout last week GBP/EUR derived support when all UK market data, apart from house price figures, saw a healthy increase but the gains were short lived due to the current concerns over a ‘Brexit’.
The Pound to Euro (GBP/EUR) exchange rate dropped to a two-month low of 1.25 on Monday but returned to trending in the region of 1.2660 before the close of trading.
In the hours ahead the UK’s inflation data for May could inspire some GBP/EUR volatility. That being said, with EU referendum related concerns driving Pound movement to such an extend, any impact from domestic ecostats may be fairly limited.
Traders Double Down on GBP Short Positions Ahead of ‘Brexit’ Vote
The Pound saw massive losses across the board coming out of the weekend after a damning poll was released pointing to the ‘Leave’ campaign garnering a 10 point lead on Friday, followed by two polls showing a marginal ‘Remain’ lead.
A lack of any impactful market data to offset damages saw the Pound fall 0.45% against the Euro as conflicting polls served to inflate the climate of uncertainty. Traders have made moves to insure against Pound losses; doubling down on short options and seeking refuge overseas as volatility is only set to increase.
The referendum is less than two weeks away and Sterling volatility is emulating that of nitro-glycerin. Bloomberg comments:
‘The U.K.’s currency has already dropped more than 4 percent this year, the worst performance among Group-of-10 peers, as investors assess the risks of an exit. It reached a seven-year low of $1.3836 in February after Prime Minister David Cameron announced the date of the vote, and has since fluctuated, often wildly, as polls suggested both sides could still prevail. A measure of two-week implied volatility reached a record high on Monday.’
European Stocks Feel Full Brunt of ‘Brexit’ Fears Depreciating Euro
The continuing miasma of panic and uncertainty clouding the UK’s EU referendum has led to a sharp decrease across the board for European Stocks at the start of the week. Naturally, Euro (EUR) exchange rates also saw a marked decline.
The bookmaker’s increased odds of a ‘Brexit’ seems to be the culprit for the Euro’s woes, even as polls suggest it is too close to call. A previous week of positive market reports bolstered the single currency with the European Central Bank’s ramping up of its QE scheme clipping its wings slightly.
This ECB development and a lukewarm speech from Mario Draghi stumped the Euro’s rise by the end of the week.
Inflation Data Bodes Well for Pound (GBP) ahead of BoE Rate Announcement
Later today, UK inflation figures are set for release along with Eurozone industrial production. Inflation is forecast to rise, boding well for a flagging Pound, while Eurozone industrial production is set to nearly double which could afford the Euro a decent boost.
The US Federal Reserve’s benchmark rate announcement coming up on Wednesday has potential to shift the market as it naturally has far reaching consequences. Also due for release on Wednesday is the UK’s average weekly earnings report. The data is expected to show a tangible decrease of 0.3%, which may shake consumer confidence.
Thursday plays host to a variety of reports, most notably the Bank of England is to announce its benchmark rate decision. Forecast to stay at 0.50%, any change in the rate is sure to affect the market drastically – although the BoE isn’t expected to make any changes to fiscal policy for at least a year. Also worthy of remark is the retail sales report for May (year-on-year).