Sterling Skyrockets – Biggest one day gain in 7 years
Yesterday saw volatility abound in the currency markets. As EU referendum campaigns recommenced, opinions on the EU referendum seem to have shifted towards a vote to stay.
Sterling made gains throughout the day but failed to maintain above 1.4700 against Dollar. Gains against the Euro, however, saw no such barriers as the pair reached 1.2964 at the European close.
Although no data was released for the UK, poll results showed a growing belief that the ‘Stay’ campaign has moved back into the lead. This meant that overall Sterling gained 2.34%, the biggest one day gain against the Dollar since March 2009.
With just two days to go before the referendum, expect volatility to continue today. UK Public Sector Net Borrowing is due for release this morning. However, the data is unlikely to have a significant impact on the market as traders price in a vote to stay in the EU. This morning, GBPUSD has opened above 1.4700 and GBPEUR is approaching the key 1.3000 threshold.
The Dollar tumbled on Monday, losing over 2% against the Pound as Brexit worries eased, The US currency also lost ground against the Euro, as a move to “Remain” is seen as positive for the single currency. There was no data released yesterday, which left the Dollar bulls unable to reverse the losses for the day.
Today Fed Chair Yellen speaks at 3pm about the US monetary policy. All eyes will be on her to see if the US will react to the potential of the UK staying in the EU. Federal Open Market Committee (FOMC) Member Powell will also speak today, after the European close.
The Euro will look to maintain levels against the Dollar today as EURUSD held above 1.1300 throughout Monday, but failed to keep up with Sterling – GBPEUR fell to 1.2964. Strong German inflation data showed promise for the Euro area, however the market will be controlled by EU referendum talks as Britain staying in the EU is seen to have positive effects on the Euro.
Today, the German ZEW Economic Sentiment is due for release. This gives a good insight into how investors and analysts see the European market at the moment. The data release will be followed by European Central Bank (ECB) President Draghi speaking on monetary policy in the Eurozone. It is unclear how much this will impact the currency markets so close to the referendum.
Data to watch: 9:30am UK Public Sector Net Borrowing. 10:00am EUR German ZEW Economic Sentiment. 11:00am UK CBI Industrial Order Expectations. 2:00pm ECB President Draghi Speaks. 3:00pm Fed Chair Yellen Speaks. 7:30pm FOMC Member Powell Speaks.