Sterling
‘Brexit’ hysteria swept across the UK yesterday and led to a substantial decline in the Pound’s reputation. Sterling’s value against a basket of its most-traded currency rivals shrank to its lowest level since December 2013 as markets reacted to a new opinion poll from ICM, which suggested that the REMAIN camp’s lead over the LEAVE camp had dropped to just 1%. The poll suggested that 44% of voters want to remain part of the European Union while 43% will vote to leave.
A separate, and less relevant, report showed that UK new car sales rose 5.3% to 518,707 in March suggesting robust domestic consumer sentiment. However, the prospect of Britain leaving the EU was too great a risk for most financial traders, who opted to sell Sterling during yesterday’s session.
Euro
The Pound to Euro exchange rate collapsed to a near-two-year low yesterday as surging ‘Brexit’ bets weighed on the UK currency.
However, despite the recent market reaction to push GBP/EUR lower, there are some analysts who predict that the single currency will suffer the most following a ‘Brexit’ scenario. They argue that Britain leaving the 29-nation bloc will stoke nationalist resentment in other European nations, such as Greece, Portugal and Spain, who might then hold their own referendums in order to obtain better EU deals. The fear is that Britain leaving could be the first thread in the unravelling of the European project.
Yesterday’s 80-pip gain for the Euro suggests that traders are not currently seeing a ‘Brexit’ as an existential threat to the single currency but in the longer term it is possible that risk markets will come to drive the Euro lower in response to these apocalyptic fears.
US Dollar
‘Cable’ depreciated by around a cent during the London session yesterday to strike a monthly low as the Pound continued to suffer due to the uncertainty of June’s EU referendum.
Over in the States Federal Reserve policymakers noted that there had been discussion regarding raising rates in April but officials concluded that an April hike ‘would signal a sense of urgency they did not think appropriate’. The Fed minutes showed that a consensus was reached to strike a cautious tone and this allowed Sterling to claw back its daily losses against the US Dollar yesterday. The US central bank signalled that it still expects to hike rates by 50 basis points during the course of the year.
Canadian Dollar
Hopes of a deal between the world’s biggest oil producing nations to curb output helped drive the Canadian Dollar higher yesterday. Kuwait’s OPEC governor said that a meeting later this month would likely deliver an agreement and the optimistic message drove oil prices higher, which in turn bolstered the appeal of the commodity-sensitive ‘Loonie’.
GBP/CAD tumbled -70 pips to a new 11-month low in reaction to the oil news.
Australian Dollar
Sterling slid by around -150 pips yesterday as ‘Brexit’ concerns drove the Pound lower and decent Chinese data increased investors’ appetite for risk.
The Chinese service sector PMI jumped from 51.2 to 52.2 in March, which, when combined with manufacturing data, pointed to the best month of private sector growth for 11 months. The upbeat figures helped persuade traders to invest in the risky but profitable ‘Aussie’ Dollar.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate lost out on a cent yesterday as Chinese PMI figures bolstered sentiment in the Asia Pacific region and new referendum polls weighed on sentiment in the UK.
Data Released
12:30 EUR ECB account of the monetary policy meeting Medium
13:30 CAD Building Permits (MoM) (FEB) Medium 4.0%
13:30 USD Initial Jobless Claims (APR 2) Medium 270k
22:30 USD Fed’s Yellen in New York, with Greenspan, Bernanke and Volcker High