Treasury’s insight on potential Brexit problems benefits Pound
Yesterday’s release from Chancellor George Osborne seems to have swayed some of the 17 million undecided Britons in the latest EU referendum polls. The insight into the possible economic loss caused by a ‘Brexit’ has shifted poll results back towards the ‘remain’ vote, which has in turn extended the rally of Sterling against the Dollar. Cable continued its recovery for a third straight session to open above 1.4300 this morning. More aggressive rhetoric on both sides of the argument may increase overall Sterling volatility in the upcoming weeks.
Another quiet economic data day for Britain today means all eyes will be on Bank of England (BoE) Governor Mark Carney as he speaks before the Lords Economic Affairs Committee. It is unlikely that he will announce any major changes before the EU referendum, however traders will be interested to hear the leader of the Bank of England’s view on the economy ahead of tomorrow’s unemployment data.
GBPEUR rose by more than half a percent in yesterday’s trading session as a shift in the June EU referendum opinions strengthened Sterling; the pair is currently trading around 1.2600 levels. A dataless day in the Eurozone also spurred the rally as the Euro had no data to dictate price action. Attention will now turn to Thursday’s European Central Bank (ECB) rate decision, though Mario Draghi is not expected to bring any fresh policy changes but is likely to play down the Euro further instead.
With no top tier US data releases yesterday, the markets listened closely to the Fed Presidents’ statements for any indications on the timing of the next rate hike. New York Fed President William Dudley said on Monday that U.S. economic conditions are “mostly favourable”, yet the Federal Reserve remains cautious in raising interest rates because threats loom.
On the other hand, Boston Fed President Eric Rosengren said that the Fed is set to hike interest rates more rapidly than investors currently expect – comments echoing many other regional Fed chiefs.
EURUSD traded relatively flat on Monday, as the lack of data left investors struggling to find a clear direction. The pair opened at 1.1309 and drifted fractionally upwards, opening this morning at 1.1313.
Data to watch: 10am Eur ZEW Survey Economic Sentiment (Apr). 3.35pm BoE Governor Carney Speech.