Will uncertainty towards the referendum bring down recent GBP EUR highs

3 May, 2016

Grace Rae

April brought some unexpected movements in rates especially in the GBP/EUR pairing. Although still downward trending, it is fair to say that the pound has been fairly unpredictable in recent weeks. At the beginning of the month we saw the pound crumble thanks to EU referendum polls that indicated a close to 50/50 split. Then as the month continued the bank voiced concerns that a vote to leave the EU would result in “an extended period of uncertainty about the economic outlook… and have significant implications for.. the exchange rate”. Then a surprise turn around toward the end of the month came thanks to a change in the referendum polls and President Obama’s visit to London where he spoke and indisputably backed the ‘IN’ campaign causing rates to trade at a 6 week high. However, towards the end of the month Sterling reached significant resistance levels against the Euro and traded between half a cent as the day came to a close.

The USD was weak towards the end of the month as GDP figures came in under expectations and the Fed announcing no further interest rate changes will take place so the pound also managed to push up against the Dollar bring good trading levels for those buying Dollars. The Euro also did well against the Dollar and ending the trading day just under a cent higher than where it started.

May kicked off yesterday on our bank holiday for another month of trading with a few data releases. Markit Manufacturing PMI for EUR in the morning which came in 0.2% above expectations followed by USD ISM Manufacturing PMI which didn’t meet forecast by 0.2% while ISM Prices Paid came in well above expectations posting 59.0 instead of the predicted 52.0 in the afternoon. In the early hours this morning Australia released their latest RBA Rate Statement and interest rate decision and the data releases continues this morning with GBP Markit Manufacturing PMI, then at 10am Euro Producer Price Index figures for March and later this afternoon as our doors close the Bank of Canada’s Governor Stephen Poloz talks.

April is a good example of how volatile and unpredictable the exchange rates can be in the lead up to the June referendum, and although we have experienced good trading levels in the past couple of weeks there is no way of knowing how long these levels with last and if or even when they will turn and start the route back down as more referendum polls are released and uncertainly starts to determine the rates again. So as ever, if you have an upcoming requirement due in the next few months then please do get in touch with the team at Currency Index and we will be happy to help. For those who already have an account with us, stay in close contact with your Currency Index account manager to be kept informed of exactly what is happening and what your options are to secure your currency, even if you do not need your currency straight away.

The week ahead:

Wednesday is full of EUR and USD data.
8:00am EUR Non-Monetary Policy’s ECB Meeting
9:00am EUR Markit Services PMI and Retail sales
1:30pm USD Trade Balance (March)
2:45pm USD Markit Services PMI and Markit PMI Composite (April)
3:00pm USD ISM Non-Manufacturing PMI

AUD New homes Sales, Retail Sales, Trade Balance and Imports and Exports in the early hours.

1:30am AUD RBA Monetary Policy Statement
1:30pm USD Unemployment Rate and Nonfarm Payrolls (April)
1:30pm CAD Unemployment Rate, Participation Rate, Net Change in Employment, Ivey Purchasing Managers Index.