Sterling
Sterling sentiment continued to tumble yesterday as ‘Brexit’ bets intensified in the build-up to the EU referendum on June 23.
Now that the vote is less than three months away a key measure of sentiment – the three month implied Sterling volatility index – jumped to a six-year high with the Euro and a seven-year high with the US Dollar. ‘Brexit’ bets were also influenced by Tuesday’s devastating terrorist attacks in Brussels and a new poll from ComRes showing reduced support for the ‘REMAIN’ campaign.
Euro
The Pound to Euro exchange rate slumped to its lowest level since 2014 yesterday as ‘Brexit’ bets came into sharper relief now that the vote is only three months away. GBP/EUR plunged half a cent on the day in response to market jitters.
Later this morning the Office for National Statistics is set to release February’s UK retail sales figures, which are also liable to put pressure on the Pound. Analysts expect the ecostat to show that retail sales declined -1.0% last month, which would bring the annualised index down from 5.0% to 3.4%.
US Dollar
‘Cable’ depreciated by around -125 pips yesterday as a mixture of enhanced ‘Brexit’ bets and hawkish Federal Reserve sentiment sent GBP/USD spiralling.
The Pound suffered from a nasty shift in sentiment related to increased bets that Britons will vote to leave the 29-nation bloc and things got worse for Sterling when a slew of Fed policymakers shocked markets with talk of further rate hikes, possibly as soon as April. This hawkish attitude is at odds with last week’s FOMC statement, which saw the Fed reduce 2016 rate hike expectations from 100 basis points to 50 basis points.
Canadian Dollar
The Canadian Dollar failed to take advantage of the latest drop in Sterling sentiment because the rejuvenated US Dollar led to a decline in the North American nation’s most lucrative export. Crude oil prices sank -US$1.66 to US$39.79 per barrel as the ‘Greenback’ strengthened and US oil inventories surged unexpectedly from 1.3 million to 9.4 million.
Australian Dollar
A downturn in global risk sentiment due to increased Fed rate hike prospects allowed Sterling to register a decent 150 pip appreciation against the Australian Dollar yesterday. The hawkish Fed remarks sent the US Dollar rocketing, which in turn pushed Dollar-denominated commodity prices lower and reduced investors’ appetite for riskier but more profitable asset classes such as the ‘Aussie’.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate remained fairly flat yesterday as the day’s two biggest foreign exchange stories cancelled themselves out where GBP/NZD was concerned. The ‘Brexit’ related Sterling sell off crashed into the Fed rate hike related commodity market sell off and the day ended with a deadlock.
Data Released
09:30 GBP Retail Sales (MoM) (FEB) Medium -1%
09:30 GBP Retail Sales (YoY) (FEB) Medium 3.40%
12:30 USD Durable Goods Orders (FEB P) High -3.0%