Sterling rallies as referendum nears
Sterling continued to strengthen yesterday reaching three week highs against the Dollar, and fourteen week highs against the Euro. Although there were no data releases through the day, fears surrounding the upcoming EU referendum have continued to ease. This has helped to underpin the Pound. Today, the first-quarter GDP revision and investment estimate will be watched closely from the UK. If the investment estimate reaches the predicted 3.2%, expect no change in the current Sterling trend.
The US Goods Trade Balance declined to US$58bn for April from US$57bn the previous month, showing gains for imports over the month and therefore improving overall confidence in the economy. The Dollar failed to maintain the recent momentum however, as investors seem to be waiting for Fed Chair Janet Yellen to speak on Friday before committing to a position. After the Fed’s recent hawkish statements, expectations are that Yellen could reinforce the view that the central bank might raise interest rates as early as next month, or July.
The Dollar lost more ground against the Pound, as the “remain” Brexit campaign gathers more momentum, leading to strong Pound buying. The pair opened Thursday at 1.4697, showing a loss of 0.43% from yesterday’s open for the Greenback. EURUSD opened this morning at 1.1155, with the Dollar losing 0.13% from Wednesday’s open.
The Euro continued to weaken against Sterling in yesterday’s European trading session as Sterling strength overpowered the single currency despite positive data from the Eurozone. German IFO data printed above expectations in the early hours of the session which included Business climate, expectations and current assessment figures. The Euro ended the day on 1.3174 , nearly half a percent lower versus the Pound. There is no significant data to watch today in Europe.
Data to watch: 9:30am UK Q1 GDP revision, Prelim Q1 investment estimate. 11.10am US FOMC Member Bullard speaks. 1:30pm US Core Durable Goods Orders, Unemployment Claims. 5:00pm FOMC Member Powell speaks.