Referendum campaigns suspended after fatal attack
There were no changes in UK interest rates yesterday as expected, however Sterling failed to take this opportunity to recover. The newest IPSOS Mori poll shows a lead of 6% for the ‘Leave’ camp. This is significant because the previous IPSOS Mori poll printed an 18% lead for the ‘Stay’ campaign, showing how many opinions have changed over the last month. As a result of this, GBPUSD fell to a 10-week low of 1.4050.
Sterling saw a sharp turn as EU referendum campaigns were cut short following the tragic murder of Labour MP Jo Cox in Birstall. Sterling recovered against the Dollar from 1.4080 to 1.4200 within two hours of the European close. Referendum campaigning has been suspended today and opinion polls due for release today will be delayed until Monday. This should shift today’s expected volatility to the start of next week instead.
The Euro continued to weaken early in yesterday’s trading session despite inflation data proving stronger than expected. The Eurozone Consumer Price Index (CPI) printed at 0.4%, considerably higher than the market consensus of 0.0%, whilst core CPI met targets of 0.8%. Today all eyes will be on European Central Bank (ECB) President Draghi when he speaks in Munich.
In the US, the headline CPI fell in line with expectations with a 0.2% gain for May. Initial jobless claims missed expectations, however – the number of people who filed for unemployment jumped to 277k from the 264k posted last week.
The data will worry the Fed, especially after Yellen stated on Wednesday that the slowdown in labour market growth was a concern for the US economy. The Philadelphia Federal Reserve Manufacturing Index came in above expectations, although the impact on the Dollar was marginal as investors focus on global events and overall risk sentiment.
Data to watch: all day EUR EcoFin meeting. 10am EUR Q1 Labour Cost. 1.30pm US May Housing Starts & Building Permits, MoM. 4pm EUR ECB’s Draghi speech.