Referendum polling continues to control the markets

15 June, 2016

Grace Rae

The Bank of England released May’s key UK inflation figures yesterday morning. The month on month producer price index input figure was the only positive outcome, which came in 1.7% above the expected result. Other UK data such as core consumer price index, PPI core output and producer price output data figures did not meet expectations, while the Euro zone posted positive data for April’s Industrial Production, up 0.7% year on year and 0.4% for month on month. The announcement of positive UK inflation had helped the Pound claw back some small gains throughout the mornings trading, but was short lived and Pound-Euro continued to trade within a half a cent range throughout the day. Just another example that with the referendum just over a week away, the rate movements are completely dependent on day to day polls rather than economic data.

The afternoon focused its attention to US data which posed a few positive results. US retail control posted 0.1% better than predictions, retail sales month on month for May posted 0.2% better, import price index 0.7% better and April’s business inventories 0.1% better than expected. Among the US data not all results were positive and Sterling-Dollar traded within a very tight range throughout the day with no big movements.

Today’s data:
Today data releases include UK claimant count, average earnings and ILO unemployment all at 9:30 this morning, follow by Euro zone trade balance at 10:00am, US producer price index at 13:30pm, and US industrial production at 14:15pm. In the evening the FOMC economic projections report will be released at 19:00pm followed swiftly by the Fed’s latest interest rate decision and monetary policy statement. This is one to keep an eye on as Yellen could hint towards a future rate hike in either August or September, as she has previously suggested to push back a potential rate hike while we all await the decision of the EU referendum. And overnight the Bank of Canada governor Poloz Speaks.

Referendum poll updates:
Latest YouGov polls have shown a lead for the leave campaign, and recent betting odds have closed in from 70% to 59% betting on a remain vote, suggesting more minds are turning towards a brexit.

If you have a requirement due in the months following the vote, you may be thinking that time is on your side, so the urgency to trade may not have come to surface. The Brexit is still a very real possibility, and the effects this could have on exchange rates could be detrimental to those of you who are relying on the hope that rates will improve post vote before securing your currency for your overseas property purchase.

Seriously mull over your options and remove fears that a potential Brexit will destroy the Pound’s strength by considering a stop loss and limit order or book a forward contract, in where you can secure your currency at a fixed rate for up to 2 years ahead. With the vote closing in, it is likely to be a busy 9 day ahead, so if you have any concerns and would like to talk to one of our friendly brokers then please call in on 01923 725 725.