Sterling strengthens as polls show more support for “Stay” campaign
The Sterling rally continued yesterday, with GBPUSD peaking just above 1.4400. Sterling sentiment has improved following the latest polls indicating a modest lead for the “Stay” (in Europe) campaign. Mark Carney refused to comment on a Treasury report which predicted a 6% reduction in the UK economy following a ‘Brexit’. Remarks on a potential cut in interest rates if necessary saw Cable drop before the end of Carney’s speech.
The rally has further slowed down this morning ahead of UK employment data due for release at 09:30. Market consensus is for no change in unemployment at 5.1%, and no change in the average earnings index at 2.1%. Any strong data will likely cause a continuation of this week’s strength in the Pound before Monetary Policy Committee (MPC) Member McCafferty speaks at the Bank of England at 2pm.
The Euro weakened in yesterday’s trading session as Sterling gained nearly half a percent, ending the day on 1.2670. The German (ZEW) economic sentiment data surpassed expectations indicating a positive mid-term forecast for the German economy. German PPI index for March fell by 0.1%, putting further pressure on the single currency in today’s session.
US housing data was released yesterday and the figures posted showed slowing demand in the US housing market, which may justify Federal Reserve Chair Janet Yellen recent dovish comments over potential near term rate hikes. Building permits issued by the government in March were down to 1.086m from 1.177m the previous month, and below the market consensus of 1.200m. Housing starts also fell by 8.8% in March after a gain of 6.6% the previous month. The Dollar was undermined by the data and lost ground against its peers, excluding the Euro.
Data to watch: 7am EUR March German PPI. 9.30am UK March Claimant Count Change, February Unemployment Rate, February Average Earnings. 3pm US Existing Home Sales, Crude Oil Inventories.