In Out polls boost for Sterling

19 May, 2016

Simon Eastman

Yesterday we saw the pound make gains across the board which was despite some mixed unemployment data.

Average earnings excluding bonuses were down on expectations whereas including was above expectations. The headline unemployment figure was as forecast at 5.1 percent while the claimant count stayed unchanged from last month. EU inflation followed providing no surprises coming in negative for the monthly figure and slightly down for the yearly figure. As a result, sterling faltered from the gains it had made the day before and it looked like to be on the back foot.
Then at lunch a string of polls were released on the EU referendum voting. The main one being from IPSOS MORI and this threw up some surprising results. The Remain vote was leading at 55 percent, while the Leave vote was faltering down at 37 percent, an 18 percent difference, the largest gap there’s been so far. Could Boris Johnson’s recent calamitous speech done irreversible damage to the Leave campaign?

As far as sterling was concerned, it was a major boost as from lunchtime markets rallied behind the pound and we saw a surge of over 2 cents against the single currency and similar against the dollar, with strong gains against all the major currencies. As such we had previously placed limit orders filling left, right and centre as previously unattainable trading levels were exceeded and fresh orders placed at higher levels just in case the pound has some more to run in the coming days. If you are looking to take advantage then speak to one of the team today about fixing your forwards or placing limit orders if you’re budget rate isn’t quite there. The markets trade 24 hours for most of the week so this is a key tool to cover yourself while the UK is closed for business.

As the manic trading day came to a close here investors across the pond looked towards the Federal Reserve and the release of their minutes to see if there would be any indications as to if and when the FOMC may decide to hike interest rates again.

For sterling/dollar the minutes were bad news as the hawkish stance by the Fed indicated as long as economic conditions were sound, we would most likely see another rate hike next month. There were some risks highlighted though regards this hike, including China and Brexit as potential curve balls. Inflation was also a concern although the recent inflation figures showed improvement so this is unlikely to be a factor. For sterling, the rally was curbed and a half cent regained by the greenback.

Elsewhere, political uncertainty in South Africa and a rallying pound coupled together to showcase the Rand at some of its weakest levels we have ever seen. Not quite as bad as the peak a few months ago but pretty close to it. Anyone looking to move money into South Africa would be prudent to be at the ready to take advantage in the coming days just in case this recent sterling surge is short lived. Polls can change quickly and the markets can follow suit, so make sure you don’t miss out trying to gain an extra inch, only to lose the proverbial mile!

Overnight the Australian unemployment data showed the rate of change in employment had dropped significantly from last month, down from 26.1 to 10.8, missing the forecast rate of 12.5. Unemployment headline rate was unchanged from last month although it was expected to increase so the mixed results made little difference to the already weak Aussie which is suffering from the most recent interest rate cut.

This morning we have UK retail sales and then the ECB accounts meeting at lunchtime while this afternoon the US sees the release of the Conference Board overall economic future trends figures, giving an insight into how the economy is and expected to perform going forward. Not much, but some key releases so make sure you keep the mobiles on just in case today is more of the same as yesterday!