Aussie consumer confidence sharply higher

Today's Highlights

• Aussie consumer confidence sharply higher

• UK data should weaken

• GBPEU prepares for possible Brexit

FX Market Overview

It must be hard when you run a country which is fantastically corrupt to hear the British Prime Minister confirm it in an unguarded comment. This was referred to as 'undiplomatic' but some reporters it does suggest that the antonym for 'diplomacy' is in fact 'truth'. That says a lot.

The Australian Dollar paused from its recent declines overnight after consumer confidence was reported to have rocketed higher in May. There is a technical level at A$1.97 against the Pound which correlates to a downward trend that has been in place since last August and that is capping the GBP-AUD exchange rate right now. Further positive news from Oz would give room for the Pound to slip back to around A$1.90 without too much trouble.

For its part, the Pound is treading water on most fronts as the various arguments are made for and against EU membership. The European Central Bank has asked all European banks to submit their plans for a potential Brexit and polls show that a growing number of Europeans would like a vote on membership themselves. So the debate isn't just about the UK and the removal of Britain's contribution to the EU budget is a real concern for the rest of Europe as well. I read a report this morning suggesting Germans are very worried because Britain is one of the few net contributors to the EU budget and if the UK's £8.5 billion net contribution falls out of the pot, Germany may have to spend even more. That's not a popular notion and Angela Merkel is already falling sharply in the ratings. 64% of respondents in a German poll said they did not want her as Chancellor after the 2017 election. Meanwhile Greece has voted in another round of damaging austerity measures and is in the depths of debt negotiations and deflation and potential recession are being discussed in Europe as the Eurozone economy fails to recover.

UK data today includes, what ought to be, rather negative industrial and manufacturing production figures but many believe the figures will; not be as bad as last month's data, so Sterling has room to strengthen if that is so. We will also get a testimony from Chancellor Osborne to the Treasury Select Committee but all of that is a mere prelude to tomorrow's Bank of England blitz. No change is expected in the interest rate decision but the tone and mood of their statement and minutes will be the highlight. Sad isn't it that traders can get so animated over the words of a few central bankers but such is our lot. Any hint that they believe interest rates could rise with or without a Brexit vote or hints that a cut is inevitable after such a result will sway the tremulous Pound.

The rest of the day is fairly quiet on the data front. I'll leave you with the story of a woman who wrote on Mumsnet that she gave a £100 gift to a couple at their wedding when they asked for cash rather than gifts. However, she was shocked to receive an email from the newlyweds after the event requesting she increase her gift through the euphemism, "if you wanted to send an adjustment, it would be thankfully received." Sometimes, very rarely, words fail me.