Market Update – GBP EUR
The Pound to Euro exchange rate is currently trading close to its lowest level in two months due to jitters ahead of the June 23 EU referendum.
Polls Show Tight EU Vote
Sterling weakened at the start of last week’s session in response to a poll from ICM giving the ‘Out’ camp a surprise five-point lead over the ‘In’ campaign. The survey prompted a bout of Sterling selling as investors sought to adjust their positions moving towards the crucial vote.
However, the Pound managed to claw back some of its losses, striking a monthly high of 1.28 on Tuesday in response to a different poll which gave the ‘In’ camp a 12% lead. A separate report detailed that Eurozone annualised growth accelerated from 1.5% to 1.7% in the first quarter, but the ecostat was almost completely overshadowed by the ‘Brexit’ poll.
Impressive UK Data Not Enough
Wednesday saw UK factory output data massively surpass economists’ expectations, with manufacturing output printing at 2.3% compared to calls for negligible output of just 0.1%. However, the Pound failed to take advantage of the upbeat report and lost ground as EU referendum jitters kicked in once more.
GBP/EUR ticked back towards 1.28 on Thursday thanks to some surprisingly strong UK trade data. An 11.2% jump in goods exports helped bring the deficit down by £0.1 billion in April and this boosted Sterling slightly versus the single currency.
But the Pound’s gains did not last for long and Sterling began a two-cent depreciation on Friday as concerns regarding the referendum came into sharper relief in the fortnight before the vote. Sterling declined as the cost of insuring against swings in the currency reached its highest levels since the worst days of the financial crisis in 2008.
Week Ahead
The Pound to Euro exchange rate fell to two-month lows below the 1.26 mark at the start of this week’s session and Sterling could suffer further losses if nerves continue to fray ahead of the June 23 vote.
Tuesday’s UK CPI print is tipped to rise from 0.3% to 0.4% and Wednesday British job report is anticipated to see unemployment remain at 5.1%. But Sterling is unlikely to attract buyers following the data prints because referendum concerns are firmly at the top of the agenda now that the vote is just 10 days away.
Data Released
14th June GBP Consumer Price Index (YoY) (MAY) 0.40%
14th June EUR Eurozone Industrial Production w.d.a. (YoY) (APR) 1.40%
15th June GBP ILO Unemployment Rate (3M) (APR) 5.10%
15th June GBP Average Weekly Earnings (3M/YoY) (APR) 1.70%
16th June GBP Retail Sales (YoY) (MAY) 3.80%
16th June EUR Eurozone Consumer Price Index (YoY) (MAY F) -0.10%
17th June GBP Bank of England Rate Decision (JUN 16) 0.50%