Sterling
The Pound rebounded against the majors yesterday in response to another new EU opinion poll. Following a week of surveys suggesting the ‘Out’ camp was starting to take the lead in the run-up to the June 23 referendum, yesterday’s poll from ORB gave the ‘In’ campaign a significant lead, which in turn led to higher demand for Sterling.
ORB’s telephone poll revealed that 52% of respondents wanted to stay in the EU compared to just 40% who favoured leaving. However, when the data was whittled down to those certain to vote the ‘In’ camp’s lead shrank to just one percentage point – so volatility in Sterling pairs is highly likely as the day of the vote approaches.
Euro
The Pound to Euro exchange rate recovered from Monday’s three-week low yesterday, rallying by around 70 pips in reaction to the latest shift in sentiment ahead of the June 23 EU vote.
The extent to which EU referendum sentiment is affecting GBP/EUR was highlighted yesterday when the single currency softened even though domestic data printed positively. The latest Eurozone GDP report showed that the currency bloc – formerly the laggard of the global economy – witnessed economic growth of 1.7% in the first quarter. This equates to a quarterly growth score of 0.6%: significantly higher than Britain’s 0.4% or the US’ 0.2%. Eurostat reported that robust increases in business investment and exports were behind the sturdy figure.
However, demand for the Euro remained weak due to the latest shift in EU polling data.
US Dollar
‘Cable’ rallied by around a cent yesterday, at one point striking a seven-day high, as public opinion appeared to shift back in favour of remaining in the European Union.
With markets not expectant of a Federal Reserve rate hike in June, following May’s dismal non-farm payroll print, the focus is firmly on Britain’s in/out EU referendum. The bookies have put the chances of a ‘Brexit’ at around 30% but polling data suggests we could be in for a much closer vote. Subsequently, the Pound to US Dollar exchange rate is liable to fluctuate in reaction to new survey data over the coming days and weeks.
Canadian Dollar
Sterling rallied initially versus the Canadian Dollar yesterday as ‘Brexit’ bets cooled in reaction to the ORB EU survey, however, the ‘Loonie’ fought back during the afternoon as oil prices surged to their highest levels in 2016.
Crude oil is Canada’s most lucrative export and consequently the ‘Loonie’ often trades in tandem with the oil market. Oil prices have almost doubled since hitting 13-year lows earlier in the year and ‘black gold’ settled above US$50 a barrel last night for the first time since July 2015, which helped drive demand for the commodity-sensitive Canadian Dollar higher.
Australian Dollar
The Pound to Australian Dollar exchange rate tumbled by around a cent to strike a new monthly low yesterday. The main driver behind the ‘Aussie’ Dollar’s rally was the Reserve Bank of Australia’s decision not to slash interest rates in June. The RBA noted that the strength of the domestic currency was a complication for inflation prospects but noted that the current level of monetary policy was sufficient to achieve sustainable growth and drive consumer prices higher in the medium term.
New Zealand Dollar
The Sterling to New Zealand Dollar exchange rate held fairly flat yesterday as traders half-heartedly adjusted their policy bets to suggest that the Reserve Bank of New Zealand will leave rates on hold this evening. Some investors had previously priced in the prospect of a RBNZ rate cut but sentiment shifted in favour of the ‘Kiwi’ following the RBA’s decision to leave policy on hold.
Data Released
09:30 GBP Industrial Production (YoY) (APR) Medium -0.3%
09:30 GBP Manufacturing Production (YoY) (APR) Medium -1.3%
15:00 GBP NIESR Gross Domestic Product Estimate (MAY) Medium 0.3%
22:00 NZD Reserve Bank of New Zealand Rate Decision (JUN 9) High 2.25%