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Pound enters calm before referendum storm

Pound enters calm before referendum storm

Following a week of weakness for Sterling, Friday’s figures only added fuel to the fire. A dreadful industry output figure along with a larger than expected trade deficit meant GDP estimates for Q1 are the lowest they have been since 2012.

Nevertheless, Friday evening saw GBPUSD recover to close just above 1.4100 levels which have been maintained over the weekend. Against the Euro, with no UK data due for release today, all eyes will be on inflation rates due for print tomorrow. However these may have a muted impact due to the upcoming EU referendum.

In the US, there was no economic data released on Friday. The Dollar lost ground against the Pound and the Euro, as it remained vulnerable to the overall market sentiment and the negative tone surrounding the Greenback.

With no data due for today, all eyes will turn to the Fed as they announced that there would be an unexpected, closed, meeting of the Board of Governors this afternoon. During the meeting the Board of Governors will review and determine advance and discount rates charged by the Fed banks. This is notable because the last time such a meeting took place was on November 21st, less than a month before the Fed’s historic rate hike.

European Central Bank (ECB) member Mersch disclosed on Friday that the central bank is not aiming for a weaker Euro to stimulate the economy. GBPEUR is range-bound for the moment, and last week it held between 1.2330 and 1.2560. This trend has become more apparent as no data has come out of the Eurozone since Friday, so there is nothing to affect the strength or weakness of the Euro.

The same could be said of EURUSD too, as choppy trading conditions continue with trading still between the 1.13-1.14 levels. The single currency will have to rely on overall market sentiment for any gains in today’s session.

Data to watch: 1.30pm US Treasury Jack Lew speech, 2.30pm Fed’s Dudley speech.

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