Sterling
On a day when England beat Wales with a last-minute goal, UK retail sales smashed expectations and the Bank of England left rates on hold the most significant moves in the Sterling exchange rate appeared to come in reaction to the deeply shocking and tragic murder of a British MP.
Jo Cox, 41 year-old Labour MP from Batley and Spen near Leeds, was shot dead on the streets of West Yorkshire yesterday. ‘Brexit’ campaigning was put on hold following the brutal attack and analysts noted that the emotional response to the atrocity could favour the ‘Remain’ campaign. Indeed, the Pound rallied versus most of the majors following the tragic incident.
Euro
Sterling strengthened by around half a cent against the Euro yesterday as ‘Brexit’ sentiment appeared to wane.
As well as the horrific murder of Labour MP Jo Cox, UK ‘Brexit’ support could have been dampened by England’s last gasp victory over Wales in France. It’s hard to measure the impact of such events but it’s possible that a strong England performance at the Euros could improve Britons’ view of our European neighbours, and subsequently bolster support for remaining in the EU.
In other UK news, British retail sales jumped 0.9% in May, smashing economic forecasters’ predictions of 0.2%. Clothing sales surged 4.3% as consumers updated their wardrobes for summer and this was the primary driver behind the upbeat result.
Across the Channel in the Eurozone, consumer prices printed at -0.1% as expected. The result had little impact on the single currency, although traders were cheered by the 0.8% rise in core inflation, which strips out the impact of volatile food and fuel prices.
US Dollar
Following the Federal Reserve’s dovish policy statement on Wednesday evening, the Bank of England released a cautionary statement of its own yesterday. BoE Governor Mark Carney left rates on hold at the current record low of 0.50% and warned of the potential consequences of a vote to leave the EU next week.
Although Carney didn’t explicitly state that rates would be reduced in the event of ‘Brexit’, his rhetoric suggested lower rates could be employed to stimulate demand following a potential vote to exit the bloc. Some analysts interpreted the statement as a hint that previous comments about raising interest rates could come into sharper focus if Britain votes to remain part of the bloc.
Sterling rebounded from a two-month low to register a 30-pip daily gain by the end of the day.
Canadian Dollar
The Pound to Canadian Dollar exchange rate appreciated by just under a cent yesterday to strike a weekly high as global risk sentiment was dealt a blow by a hesitant Bank of Japan.
Yield-hungry investors were hoping that the BoJ would announce further stimulus measures yesterday morning but the central bank surprised markets with a statement of no change. Subsequently, demand for risk assets stumped and this dragged the ‘Loonie’ lower versus the Pound.
Australian Dollar
Sterling increased in value against the Australian Dollar by around 150 pips yesterday as the BoJ’s decision to remain on the sidelines in June weighed on investors’ appetite for risk.
Data down under showed that Australian unemployment remained at 5.7% in May, with 17,9000 new jobs added to the Antipodean economy.
New Zealand Dollar
The New Zealand Dollar came into yesterday’s session in good form following some robust domestic growth figures: New Zealand GDP increased 0.7% in the first quarter, beating estimates of 0.5% and driving the annualised figure higher from 2.3% to 2.8%. However, weakened risk appetite allowed the Pound to recover by the end of the day.
Data Released
13:30 CAD Consumer Price Index (YoY) (MAY) High 1.6%
16:00 EUR ECB President Mario Draghi Speaks in Munich Medium