Sterling
Sterling continued to slide against the majors yesterday as investors adjusted their ‘Brexit’ bets following prominent MP, and London Mayor, Boris Johnson’s decision to come out in support of Britain leaving the EU.
Boris is an influential figure and although traders still expect Britons to vote to remain in the 28-nation bloc the prospect of a ‘Brexit’ has no doubt increased following the Mayor’s announcement. Analysts fear that the ensuing uncertainty following a potential British exit from the EU could lead to a sharp -4% dip in GDP and a sizable -20% depreciation in Sterling. Yesterday’s selling pressure on the Pound reflects the added risk premium of Britain leaving the EU now that Boris has joined the ‘OUT’ camp.
Euro
The Pound tumbled by around a cent yesterday on news of London Mayor Boris Johnson’s decision to campaign against Britain’s membership of the European Union.
Data on the day showed that manufacturing output slowed from 52.3 to 51.0 in February and that service sector activity cooled from 53.6 to 53.0 but the single currency was insensitive to the downbeat figures because investors were focussed on the upcoming ‘Brexit’ vote.
Today’s Eurozone figures are tipped to show that business confidence cooled in February from 107.3 to 106.8 but, again, GBP/EUR movement is likely to be dictated by British EU membership speculation.
US Dollar
Yesterday marked the worst performance for Sterling versus the US Dollar since UK Prime Minister David Cameron came into power on May 6 2010.
The Pound slid -1.7% to a seven-year low against the ‘Greenback’ yesterday, its worst one-day performance since the general election when Britain was left with a hung parliament. Sterling depreciated -2.2% that day.
With US inflation printing strongly at the tail end of last week’s session and ‘Brexit’ bets swelling, GBP/USD is predicted to weaken further over the coming weeks and months as the referendum approaches.
Canadian Dollar
The Pound to Canadian Dollar exchange rate declined five cents, slumping to a new eight-month low yesterday as Sterling took a hammering across the board.
The commodity-sensitive ‘Loonie’ was boosted by a 7% rally in crude oil prices, which came as the International Energy Agency said that US shale oil production could decrease by 600,000 barrels per day this year and another 200,000 per day in 2017. However, it is clear that the shift in ‘Brexit’ bets following London Mayor Boris Johnson’s announcement was the key driver behind the profound five cent depreciation in GBP/CAD.
Australian Dollar
The Australian Dollar slammed Sterling yesterday to reach a new nine-month low in GBP/AUD. The Pound weakened by a whopping six cents in reaction to the Boris ‘Brexit’ pledge and investors now fear that the UK currency could slip into crisis mode as the key vote approaches.
New Zealand Dollar
The New Zealand Dollar – not one to miss out on large market wide moves – joined the party and knocked the Pound for six yesterday. GBP/NZD sank six cents to a nine-month low as investors started betting, en masse, against the UK currency.
Data Released
09:00 EUR German IFO – Business Climate (FEB) Medium 106.8
15:00 USD Consumer Confidence (FEB) High 97.