Two referendum polls contradict each other, extreme Pound volatility follows
Yesterday told the tale of two EU referendum polls causing volatility for Sterling unseen for over two months. The first poll was from ORB and released in the morning, printing a lead of 51% to 46% for the ‘remain’ side. This caused a strengthening of GBP against both the Euro and the Dollar.
The afternoon changed things, however. An ICM poll for the Guardian newspaper contradicted the ORB poll; it showed a 52% to 48% lead for the ‘leave’ camp. These results caused the sharpest decline in the value of Sterling for two months, pulling the Pound back below 1.4500 and 1.3000 against the Dollar and the Euro respectively.
Today, UK monthly Manufacturing PMI, Consumer Credit and Mortgage Approvals will also be printed this morning. These data releases will be looked at closely for any clues on the overall state of the UK economy. If there is stronger data than expected, Sterling will attempt to regain some of the losses seen late in yesterday’s trading session.
The Euro recouped nearly 1% versus the Pound as positive data from the Eurozone and “Brexit” jitters resulted in the single currency moving back towards the high 1.2900 levels. European Consumer Price Index for May showed modest improvement at 0.8%, slightly higher than last month’s figure of 0.7%. Eurozone unemployment rate figures held at 10.2%. Eurozone Markit Manufacturing PMI data is due this morning.
US consumer spending recorded its biggest month-on-month increase since August 2009 on Tuesday, jumping by 1% for April. However, Consumer Confidence and the Chicago PMI Index both came in below expectations for May. As a result, investors slightly lowered their expectations of a June rate hike which weighed on the Greenback.
GBPUSD reached daily highs of 1.4725 on Tuesday morning, but Brexit uncertainty surrounding the Pound meant that Cable (GBPUSD) drifted lower throughout the day. Even with the weaker Dollar, GBPUSD opens this morning at 1.4483, down 1.66% from yesterday’s highs. EURUSD finished the day virtually unchanged, with fractional gains for the Dollar.
Data to Watch: 9am Euro May Markit Manufacturing PMI . 9.30am UK May Markit Manufacturing PMI, April Consumer Credit, April Mortgage Approvals. 2.45pm US May Markit Manufacturing Index. 3pm US May ISM Manufacturing PMI, ISM Prices Paid, April Construction Spending. 7pm Fed’s Beige Book.