Today's Highlights
GBP/EUR at a new 4 month high
IFS cautions UK over Brexit
Bank of Canada leaves interest rates unchanged
FX Market Overview
Yesterday marked another solid day for the Pound as the Sterling Euro exchange rate jumped to a new 4 month high of 1.3215 and Sterling Dollar rose close to the 2016 highs. This was despite better than expected economic data from the Eurozone and the United States. The Institute of Fiscal Studies cautioned that the UK could face 2 more years of austerity measures if the country voted to leave the EU, a prospect that investors assessed would convince more voters towards the Remain campaign. This has helped give the Pound a boost. Bookmakers have now slashed the chances of the UK leaving the EU to under 20%.
The Australian Dollar weakened overnight as Australia's first quarter capital expenditure survey showed that new Capex fell by 5.2% in the first quarter. Forward looking expenditure was slightly more positive but with the Reserve Bank of Australia focussing on inflation which is running well below target, there is a real risk that interest rates may be cut at the next meeting in a couple of weeks. July CPI will also be closely watched and the Australian Dollar is set to remain vulnerable in the short term.
Today we started with UK growth figures which as expected, came in at 0.4% for the first quarter. Consumer and investor confidence has certainly been affected by the upcoming referendum and a weaker reading could well have seen the Pound lose a little of its current lustre but, as the number was as expected, the Pound simply stalled after having rallied for a day or so. Fundamental data has been largely ignored owing to the EU vote and any move is likely to be short lived as markets await the results of the latest opinion polls and tonight's debate before taking on new positions.
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