GBP/EUR – Rallies on EU Referendum Poll
The combination of mostly positive domestic data and easing ‘Brexit’ concerns has caused the Pound to jump by the most for the year so far, with the currency holding above 1.29 against the Euro. Whilst EU referendum opinion polls have produced divergent results, the latest poll gave the ‘remain’ campaign a lead of 55%. Also supportive of demand for the Pound was positive results from labour market data. Of particular note was better-than-expected average wage growth and record-high employment. However, there is still an undercurrent of concern that the UK will see tepid growth this year, especially after inflation fell by more than expected.
GBP/USD – Gains ahead of FOMC Meeting Minutes
The GBP/USD exchange rate reached a high of 1.46 today after the publication of the latest EU referendum opinion poll. However, the US Dollar strengthened versus most of its currency rivals thanks to safe-haven demand. Global stock volatility and falling commodity prices can be linked to reduced risk-appetite. The latest set of Federal Open Market Committee (FOMC) minutes from the most recent interest rate decision will be published this evening. Given that Federal Reserve Chairwoman Janet Yellen delivered a particularly dovish speech following the meeting, there is a high chance that the minutes will also be dovish in tone. If that is the case the GBP/USD exchange rate is likely to extend gains.
USD/GBP – US Labour Market Data and UK Retail Sales in Focus
There will be a number of domestic data publications tomorrow with potential to provoke USD/GBP exchange rate volatility. UK retail sales and US labour market data should cause volatility. With that said, however, British data is having minimal impact recently as trader focus is dominated by EU referendum developments. If a fresh opinion poll gives a lead to the ‘leave’ campaign, for example, it will be very unlikely that positive domestic data would have any impact. US data is more likely to be impactful, however, as positive labour market figures would pile added pressure on the Federal Reserve to increase rates.
EUR/USD – Declines on ECB Uncertainty
The comparative US Dollar strength has limited the appeal of the single currency today thanks to negative correlation. Additional Euro losses can be linked to ongoing speculation that the European Central Bank (ECB) will have no choice but to ease monetary policy further thanks to deflationary pressures. Tomorrow is likely to see significant EUR/USD exchange rate volatility with the ECB due to publish minutes from the most recent policy meeting. If the minutes reveal that some policymakers called for an immediate rate cut the common currency is likely to dive.
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