- Sterling volatility expectations at 7-yr high – Pound weakens across the board.
- GBP/EUR down -130 pips – German CPI remains at 0.1%.
- ‘Cable’ hits mid-April low – US consumer confidence softens.
- Canadian unemployment slides to 6.9% – GBP/CAD declines 2 cents.
Sterling
The Pound suffered steep losses versus all of its most-traded currency peers on Friday as fears regarding the June 23 referendum came into sharper relief.
With the crucial vote now less than two weeks away traders are ramping up their efforts to insure against swings in the value of the Pound. While positions have been taken to avoid losses following a vote to remain, the majority were taken to insure against a devaluation of the Pound in the event of ‘Brexit’. The options market reflects more fear of volatility in Sterling over the next two weeks than at any point since the throes of the financial crisis in 2008.
Euro
The Pound to Euro exchange rate slumped -130 pips on Friday to strike a new monthly low as investors fretted over the potential for volatility following this month’s EU referendum.
Although the outcome of the vote did not become any clearer on Friday market jitters intensified as the date of the referendum drew closer, suggesting that we could witness further Sterling depreciations over the next ten days.
Data on Friday showed that German consumer prices increased at an annualised rate of just 0.1% in May, but the lowly figure was not enough to lift Sterling against the single currency. Neither was the publication of a Bank of England survey showing that British consumers expect UK CPI to hit the 2.0% target in 12 month’s time.
US Dollar
‘Cable’ tumbled to its lowest level since mid-April on Friday, declining two cents in response to another wave of investor repositioning ahead of the June 23 referendum.
In the United States, data showed that the University of Michigan’s latest consumer confidence index cooled from 94.7 to 94.3 at the start of June. However, the ‘Greenback’ remained well-bid as the current conditions index reached 111.7, its highest level since July 2005.
The Pound to US Dollar exchange rate is now around five cents weaker than it was on the last day of May.
Canadian Dollar
Sterling plunged to a mid-April low against the Canadian Dollar on Friday as a combination of ‘Brexit’ fears and decent Canadian labour market figures helped drive GPB/CAD lower by almost two cents.
The Canadian unemployment rate was expected to rise from 7.1% to 7.2% but investors were cheered by a 13,800 rise in job creation, which helped drag the jobless rate down to 6.9%. The ‘Loonie’ strengthened in response to the result, despite data showing that total hours worked in the Alberta region slumped to a three-decade low.
Australian Dollar
The Pound to Australian Dollar exchange rate hit a new monthly low on Friday after sinking -130 pips on fears that Sterling could slide as much as -7% in the event of a vote to leave the European Union.
The high-yielding ‘Aussie’ has now rallied by around five cents since Tuesday morning when the currency was boosted by the Reserve Bank of Australia’s decision to leave rates on hold.
New Zealand Dollar
Sterling tumbled by -100 pips to strike a yearly low against the New Zealand Dollar on Friday. Again, it was a case of market jitters in the run-up to the EU referendum weighing on demand for the Pound and dragging the UK currency lower.
No key ecostats due for release today.