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Brexit clouds now casting shadows over Eurozone

Brexit clouds now casting shadows over Eurozone

Sterling fell over 1% against the Dollar yesterday, hitting its lowest level in two months. This happened after another opinion poll put the “Leave” campaign clearly ahead of “Remain” just nine days before the crucial EU Referendum.

Data wise, the UK Consumer Price Index came in below expectations for May, posting 0.3% against the 0.4% predicted. However, it seems that economic data is taking a backseat as investors look to the 23rd of June.

The Pound drifted down and consolidated around 1.4100 against the Dollar as the polls continue to cause some panic amongst investors. The pair did rebound overnight in the Asian markets, opening this morning at the 1.4150 level.

In the US there was some positive data yesterday ahead of today’s Federal Open Market Committee (FOMC) meeting. Retail sales for May came in at 0.5%, above the 0.3% consensus, but down from April’s 1.3%. Despite this, the Greenback did manage to post strong gains against its rivals, as potential ‘Brexit’ worries have started to spill over into the Euro as well as Sterling.

Today, the market is readying itself for a busy day of data releases from the States. PPI inflation data is due for release at 1:30pm along with the Empire State Manufacturing Index, followed by monthly industrial production data at 2:15pm. FOMC Economic Projections will also be released after the European close, followed by a press conference. No immediate change is expected in interest rates, but the statement and interest rate forecasts will be important for medium-term expectations surrounding US policy.

The Euro remained relatively unchanged versus Sterling during yesterday’s European trading session, ending the day at around the 1.2592 levels. Eurozone Industrial Production Data came in at 1.1%, beating the expectation of 0.7%. April European Trade Balance figures are due this morning; the single currency will look to make gains versus the Pound. Especially since the Euro’s poor form continued yesterday as German government bond yield turned negative for the first time in history as worries over a potential ‘Brexit’ have started to affect the European Union and the strength of its economy.

Data to watch: 9:30am UK Average Earnings Index 3 months/year, UK Claimant Count, UK Unemployment Rate. 10:00am European Trade Balance. 1:30pm US PPI Inflation data, Empire State Manufacturing Index. 2:15pm US Industrial Production month-on-month. 3:00pm German Buba President Weidmann Speaks. 7:00pm US FOMC Economic Projections, US Federal Interest Rate. 7:30pm FOMC Press Conference.

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