Turbulent day amidst Brexit polls and ECB

22 April, 2016

Matthew Boyle

Yesterday was a fairly busy and turbulent day for data across the board but noticeably for the major currencies – GBP, EUR and USD. Buoyant following news earlier this week that the current polls are in favour of staying in Europe (52% stay, 43% leave, 5% unknown the pound has experienced a slight and unexpected recovery in rates. GBP>EUR opened yesterday at a 3 week high and throughout the day the pound gained across the board despite poor retail sales in the morning. These gains were however short-lived as in the afternoon the US posted a reduction in unemployment which allowed the greenback to fight back regaining all of the morning’s losses.

The real focus of the day though was on the ECB as Mario Draghi released their statement after midday. Following last month’s particularly bullish tone which saw the single currency gain hugely, many expected as always Draghi to talk up the Euro, strengthening it and so causing GBP>EUR rates to drop. Draghi tackled the current notion of “Helicopter money” saying it had not been discussed, although a direct injection of cash directly to member countries may work given the currently painfully low levels of inflation. The result was a flurry in the market whilst he spoke, but interestingly as with the USD, GBP>EUR and also USD>EUR rates closed almost exactly where they opened.

Today is a much quieter day in terms of major releases with Europe largely dominating the day. German and Europe manufacturing PMI data are the ones to watch this morning alongside the Eurogroup meeting, whilst in the afternoon Canada takes centre stage as they release inflation data. With EUR dominating the day, the rest of the market will be at its behest, so keep in close contact if you have any upcoming requirements. Despite the slight relief we have seen in current rates, there is a long way to go and as we get closer to the June date a strong Euro could see the gains we have seen in the last week or so quickly eroded.

Those of you with requirements in the coming months may like to consider the current improved rates, as the sentiment in the market is having a huge impact on rates, and whilst rates can always improve the feeling is at present the downside risk certainly outweighs any potential upwards movements we may see in rates. So those of you reading who are averse to taking a gamble may like to consider the now potentially shortening odds of further rate improvements.