Articles from June 2016

UK votes to Leave eu in BREXIT

After the UK’s vote to leave the EU following a very close sentiment, Sterling has weakened significantly- but is bouncing back from it’s lows.

UK votes to Leave eu in BREXIT

There is a factor of uncertainty within the markets which has caused a lot of major sell-offs. Further to this, GBPUSD has opened this morning at a 30 year low, representing a fall of around 10% from last night’s peak, after breaking through key resistance levels.

This volatility is emphasised by the fact that there has already been a 2% bounce back. Naturally, a heavily declining rate is being seen across other Sterling focused currency pairings.

For the rest of the day, Sterling looks to remain under a lot of pressure, as will EURUSD. The next main focus will likely be the contemplation of the aftershock and how to deal with the uncertainty that is sure to follow the referendum’s result.

Sharp reactions on the money markets

It was widely expected that a remain vote would be seen after all of the polls released and therefore, it comes as no surprise that the markets reacted sharply when the contradicting news came in this morning and last night.

Looking out to the rest of the day, it’s likely to be chaotic and busy in the world of trading. It’s not just currencies that are being affected either – we’re seeing huge risk off moves elsewhere, including within the futures and commodities markets, just to name a couple.

Further to the general impact, it would come as no surprise to see central banks tightening their financial conditions and cutting interest rates. We’re also likely to hear from the ECB soon. Politics will determine the long term cost and with David Cameron resigning this morning, there is yet another factor of uncertainty on this side of the Brexit.

Pound rallies on UK Manufacturing Data

Yesterday we saw a surprise jump in UK’s manufacturing data in April to 2.3% from a paltry 0.1% in March.

Yesterday we saw a surprise jump in UK's manufacturing data in April to 2.3% from a paltry 0.1% in March.

The positive number in an area that has struggled, led to a move higher for the Pound. In addition, the NIESR GDP estimate also came out stronger, which suggests that UK growth could be stronger than thought.

The Pound will continue to be driven by the perceived outcome of the referendum in the short term, and tonight we have a two hour ITV debate (8-10pm) involving politicians from both camps.

Initial jobless claims to come

Today ECB President Mario Draghi will be speaking, and the market will be looking for any new signals or comments following last week’s meeting. In addition, we have US data with initial jobless claims later on. This data is normally benign, but given the weak non-farm payroll number on Friday it will be eyed closely. If jobless claims are rising, it could suggest that labour market growth is turning sour.

Royal Bank New Zealand rates unchanged

Overnight the Reserve Bank of New Zealand (RBNZ) left rates unchanged at 2.25%. There was some expectation that a 25 basis points cut could be on the cards. It is still likely that we will see a rate cut in the near future as the RBNZ maintain an easing bias. The NZD has strengthened on the avoidance of a rate cut.

Federal Reserve likely to hold off interest rate rises as jobs falter

US non farm payroll data last week came as a rude shock to the markets at a paltry figure of 38,000 against an expected number of 164,000.

US non farm payroll data last week came as a rude shock to the markets at a paltry figure of 38,000 against an expected number of 164,000.

The US Dollar lost ground against most of its counterparts straight after the release and has now almost moved an interest rate hike in June off the table.

Analysts and hedge funds now expect the Federal Reserve to only raise rates once in 2016, against the initial mandate of the planned 3 or 4 rate hike dot curve for the year.

The EURUSD pair rallied up 2 cents though has pulled back a bit this morning as German Factory orders data have been released showing a decline to -0.2%.

Markets will now turn their attentions to Fed member Rosengren and Fed Chair Janet Yellen’s speeches later today and also keep a close eye on labour conditions data to try and determine if the non-farm payroll number was an outlier or if broader economic conditions are slowing.

Sterling is losing ground, pushed by the ‘leave’ campaign

The Pound has lost considerable ground against the board this morning as the ‘leave’ campaign continues to gather momentum in the UK’s Referendum polling.

YouGov telephone and online surveys have put the ‘Brexit’ campaign in the lead at 45% against the ‘remain’ side garnering 41% with 11% still undecided. Expect Sterling to be fairly volatile in the lead up to June 23 up to the date of the vote.

Meanwhile, investors will look towards market data comprising of BRC Retail Sales Index for interim direction though the main theme for the pound remains with the UK Referendum polls.