Sterling
The Pound appreciated against most of the majors again yesterday as sentiment continued to move in favour of maintaining Britain’s membership of the European Union.
Prime Minister David Cameron stated ‘Brits don’t quit’, while giving a solemn speech outside 10 Downing Street urging Britons to vote ‘Remain’. Cameron said that national security and the economy would be at risk if we were to leave the union.
Billionaire investor George Soros, famous for breaking the Bank of England in 1992, added to the chorus of ‘Brexit’ warning cries by predicting that Sterling would fall by more than the 15% it devalued after the Black Wednesday crash.
Euro
The Pound to Euro exchange rate rallied by around half a cent yesterday to reach a three-week high.
Demand for Sterling appeared to pick up following news that UK commercial banks took just £370 million of emergency liquidity from the Bank of England yesterday. It was the lowest figure in an auction of this kind since January 5, which cheered traders because it appeared to suggest that financial institutions are either sufficiently prepared for a ‘Brexit’ vote or are confident enough that it won’t happen.
European Central Bank President Mario Draghi attempted to quell market jitters in Europe by confirming that the ECB was ready to release further stimulus measures in the event of ‘Brexit’.
US Dollar
Sterling jumped to its highest level since the first week of January against the US Dollar yesterday as ‘Brexit’ sentiment waned and the cost to insure against swings in the Pound fell by around 12%.
Demand for the ‘Greenback’ played second fiddle to Sterling sentiment yesterday but markets were interested in Federal Reserve Chairwoman Janet Yellen’s remarks on the legality of negative interest rates. The US central banker struck a cautious tone, suggesting that negative rates were possible, but not on the cards at this juncture.
2016 interest rate expectations have fallen from the start of the year when four hikes were predicted, suggesting that there might not even be one piece of tightening this year. Indeed, Yellen explained that economic sentiment can change ‘abruptly’ and warned that recent indicators suggest domestic productivity is beginning to cool.
Canadian Dollar
Sterling rose to a three-week high against the Canadian Dollar yesterday as markets continued to pour back into the Pound in reaction to a perceived shift in favour of remaining in the EU.
This afternoon data is tipped to show that Canadian retail sales rebounded from a -1.0% decline in March with a +0.8% expansion in April. If the result matches the forecasts then demand for the ‘Loonie’ could increase but the Canadian Dollar could struggle to appreciate versus the Pound.
Australian Dollar
The Pound to Australian Dollar exchange rate remained fairly flat yesterday even though the Reserve Bank of Australia commented on the possibility of lower rates if the ‘Aussie’ Dollar remained ‘overvalued’. The RBA noted that economic performance was sturdy but hinted at future stimulus if growth projections were ‘complicated’ by an appreciating ‘Aussie’ Dollar.
New Zealand Dollar
The Pound sank by around a cent against the New Zealand Dollar yesterday afternoon as profit-taking stances took GBP/NZD lower from an early morning 10-day high.
Data Released
13:30 CAD Retail Sales (MoM) (APR) Medium 0.8%
15:00 USD Yellen Testifies on Monetary Policy to House Financial Services Committee Medium