Plenty of volatility expected this week as the referendum draws ever closer
The Bank Holiday yesterday meant that both the UK and US markets were closed. Following the lack of economic data from the UK last week, ‘Brexit’ news took centre stage over the weekend. Prime Minister David Cameron and the new London Mayor Sadiq Khan spoke together at an EU referendum ‘remain’ rally. The BBC reports that Khan claimed “more than half a million jobs” in London depended on the UK’s membership of the EU. Subsequently, Sterling strengthened against both the Dollar and the Euro early in yesterday’s trading session, but has since corrected to show slight losses against the Euro.
Volatility will continue this week for Sterling as we are just three weeks away from the EU referendum voting day. Manufacturing PMI data is due for release on Wednesday, with a particularly busy economic calendar on Thursday. Today, however, there is no key data due for release in the UK. The Pound will therefore be driven by data from elsewhere.
The Dollar index rose to its highest levels in two months on Monday, as expectations of an imminent U.S. interest rate hike increased after Fed Chair Janet Yellen spoke on Friday. Yellen stated that a rate increase in the coming months “would be appropriate,” if the economy and labour market continued to improve. Earlier that day, the revised US GDP data was released for the first quarter, increasing to 0.8% from the 0.5% originally posted.
Janet Yellen’s comments provided the spark needed for the Dollar bulls, as the Greenback posted gains against the Pound and the Euro on Friday. GBPUSD opened this morning at 1.4639, showing a gain of 0.20% from Friday’s open. The Dollar reached its strongest level against the Euro in over two months, falling to 1.1100 over the long weekend. There was a slight Euro fightback yesterday, and the pair opens this morning at 1.1138.
With the UK market closed for the Bank Holiday, the Euro strengthened 0.3% against the Pound. The Harmonised German Consumer Price Index for May (year-on-year) printed at 0.1%, beating last month’s figure of -0.1%. The Euro closed at 1.3127 versus Sterling. Both the UK and US markets reopen today and volatility will continue. German unemployment figures are due later on today, followed by the European Consumer Price index.
Data to watch: 10am EUR May Consumer Price Indices, (year-on-year and month-on-month). EUR April Unemployment Rate. 1.30pm Apri US Personal Income (month-on-month), April Core Personal Consumption Expenditure (month-on-month), April Personal Consumption Expenditures – Price Index (year-on-year and month-on-month), April Personal Consumption Expenditures, April Personal Spending. 2.45pm US May Chicago Purchasing Managers Index, May Consumer Confidence.