The Brexit referendum – where absolutely everyone has their say
Sterling posted gains on Friday against both the Dollar and the Euro as confidence for the ‘remain’ side of the EU referendum increased. President Obama’s high-profile visit and call for the UK to remain in the EU was potentially a significant factor, as polls throughout last week shifted further away from a ‘Brexit’. With a lack of economic data due from the UK today, the Pound will be left to market sentiment. GBPUSD held above 1.4400 through to the close on Friday and further positivity from the UK should see Cable hold these levels again today.
Later in the week, focus will be on Chancellor George Osborne who will be questioned by the Treasury Committee on the costs and benefits of the UK’s EU membership. Market analysts are expecting him to predict an extreme economic loss should the UK vote to leave the EU, which will likely push polls further away from a ‘Brexit’ and further increase Sterling strength.
The Euro weakened on Friday as PMI data for the bloc in April did the single currency no favours – manufacturing and composite data came in lower than expected. Consequently, this added to the Euro weakness against the Pound and the pair ended the week at around the mid 1.28 levels, the highest since March 18th. This morning German IFO survey results are due for the month of April, with early consensus showing signs of a positive short term outlook for the German economy. If expectations are met, it should provide some reprieve for the single currency.
The US Markit flash PMI manufacturing index fell to 50.8 in April, falling from 51.5 in March and coming in below the market consensus of 52.0. It was the lowest reading posted since September 2009, and casts further doubts over the manufacturing sector after the Philadelphia Fed index also missed expectations on Thursday. EURUSD reached its lowest level in a month, as Dollar bulls pushed the pair to lows of 1.1218 on Friday. There has been a slight reversal this morning with the pair moving upwards to the 1.1250 level as uncertainty increases ahead of Wednesday’s Fed statement.
Data to watch: 9am GER IFO Business Climate/Current Assessment/Expectations (Apr). 3pm US New Home Sales & Change (Mar).