Pound hits seven-year low against Dollar
It was a day of mixed outcomes for the Dollar against its major pairs yesterday as we saw it up against Sterling amidst fears of a Brexit, but down against the Swiss Franc as economic data coming out of Europe was mixed. The markets will look to New Home Sales data alongside Markit services and composite PMI to see if the Dollar can continue its downward pressure against its major FX peers. Upbeat outcomes may also help resurrect 2016 Fed rate hike speculation, which is likely to boost the US Dollar.
Cable opened yesterday morning at 1.41503 and fell over 1% throughout the day, as “Brexit” put more downward pressure on the Pound. The sell off has not eased off today, as for the first time since 2009 GBP has fallen below the 1.40 level vs the Dollar.
The Pound continued on its downward trend yesterday with markets pricing in the event risk of the EU referendum. The pair opened at 1.2831, and despite an early morning rally through 1.2840, the Sterling weakness meant that GBPEUR fell 1.09% from its daily highs to open this morning at 1.2716.
Bank of England (BoE) Governor Carney maintained a generally cautious tone surrounding the economy and testified that he would not be making judgements about the outcome of the EU referendum. He also dovishly noted that he expects to be raising rates at some point within the next three years, which is considerably less urgent than previous rhetoric hinting liftoff late this year.
EURUSD fell below 1.1000 to a one-month low yesterday, then stabilised at 1.0990 following a weaker than expected German IFO index. Figures fell below the expected 107.3 to 105.7, the lowest reading since late 2014 and the steepest rate of decline for four years. The IFO reading is further cause for concern within the Eurozone, adding to the pressure on the European Central Bank (ECB) to alter monetary policy in March. Although we saw daily lows below 1.1000, the single currency recovered slightly to end the day at 1.1015. Moving forward, we have a quiet data day for the Euro today ahead of tomorrow’s CPI data release.
Data to watch: 2.45pm US Markit Services PMI, Markit PMI Composite. 3pm US New Home Sales.