- BoE’s Carney says rates could go up after vote – UK public borrowing overshoots.
- Pound to Euro hits 3.5-month high – ‘Cable’ appreciates 150 pips.
- Sterling rises 3 cents versus Antipodeans – GBP/AUD hits 3.5-month high.
Sterling
Sterling surged across the board yesterday in reaction to a new opinion poll giving the ‘Remain’ camp a sizable lead in the run-up to the June 23rd EU referendum.
The Daily Telegraph’s latest poll gave the ‘Remain’ camp a 13-point lead over the ‘Brexit’ campaign. Markets were especially buoyed by the figures, which showed a 55% to 42% split, because the Telegraph’s readership is generally older and made up of more Conservative supporters than other polling data.
The Pound was also boosted by Bank of England Governor Mark Carney’s assertion that the next move in interest rates will ‘probably’ be up if Britain votes to remain in the EU.
However, downbeat trade data did put a black mark on an otherwise positive day for Sterling. The Office for National Statistics’ latest report showed that government borrowing came in at £76 billion in the 2015-16 financial year, overshooting forecasts of £72 billion.
Euro
The Pound to Euro exchange rate soared higher by over two cents yesterday to strike a new three-and-a-half-month high in reaction to the Telegraph’s newest EU referendum opinion poll.
Data from Germany weighed on the single currency as the ZEW survey of economic sentiment shrunk from 11.2 to 6.4. However, the main reason for Sterling’s stellar gains was optimism that the ‘Remain’ camp will win a large majority at next month’s highly anticipated EU referendum.
Mark Carney’s explicit remarks on the positives of Britain remaining in the bloc are also helping to shape sentiment. Indeed, a BMG Research poll showed that just 1% of undecided voters trust Chancellor George Osborne’s opinion while 16% trust BoE Chief Mark Carney.
US Dollar
‘Cable’ appreciated by around 150 pips yesterday thanks to another drop in ‘Brexit’ bets.
The Pound was propelled higher by the Telegraph’s latest polling data, which combined with slightly hawkish remarks from BoE Governor Mark Carney to improve the appeal of the UK tender.
Later today, US data is anticipated to show that service sector output increased from 52.1 to 53.0 at the start of May, which could give the ‘Greenback’ a minor boost. However, markets appear reluctant to bet on a June rate hike from the Federal Reserve, despite a considerable amount of hawkish rhetoric from policymakers at the US central bank. Traders just don’t believe that the Fed will choose to hike on June 17 ahead of Britain’s EU referendum on June 23.
Canadian Dollar
The commodity-correlated Canadian Dollar was buffeted by rising oil prices yesterday but it was not enough to prevent Sterling running away with around 150 pips worth of daily gains. The revitalised Sterling pressed ahead as ‘Brexit’ sentiment appeared to weaken in the UK.
This afternoon’s Bank of Canada policy decision holds the key for the next move in GBP/CAD. Any hints of rates being cut following this month’s Alberta wildfires could send the Pound surging. However, the ‘Loonie’ could easily appreciate if the central bank opts to remain in wait-and-see mode, or better yet: talks down the prospect of further easing.
Australian Dollar
The Pound to Australian Dollar exchange rate strengthened by a whopping 320 pips yesterday to strike a new three-and-a-half-month high as British sentiment improved markedly.
Sterling has suffered severe losses since the EU referendum was announced last year, however, recent polling data suggests that Britons will vote to remain in the European Union and this is helping persuade investors to pile back into the UK currency.
New Zealand Dollar
The Pound also put in an impressive performance against the New Zealand Dollar yesterday rallying by a full three cents in reaction to the latest drop-off in ‘Brexit’ bets.
Data Released
09:00 EUR German IFO – Business Climate (MAY) Medium 106.8
14:45 USD Markit US Services PMI (MAY P) Medium 53
15:00 CAD Bank of Canada Rate Decision (MAY 25) High 0.5%