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May 2016

Sterling being walloped by Brexit claim and counter-claim

Published: Tuesday 24 May 2016

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  • Sterling being walloped by Brexit claim and counter-claim
  • Euro weaker on mixed business and consumer sentiment
  • USD stronger as potential rate hike looms
     
The debate over Greece's debt and the restructuring thereof is ongoing but it is pretty clear that the status quo is unsustainable. Whilst they are their own worst enemy financially, you have to feel some sympathy for the Greek government. Having to go cap in hand to the Germans for cash and loan flexibility must be a painful thing to do, given the history between the two nations and the unpaid WW2 reparations. 
 
That aside, the Euro is weaker today against the Pound, the USD and others in spite of a reduction in consumer pessimism. Purchasing managers across the Eurozone are more pessimistic than last month and that will have motivated traders to exit Euros and buy USD. Traders are weighing up the likelihood of a US interest rate hike in June against the possibility of further monetary easing in the EU and the impact that a British exit vote might have on the Eurozone and the wider EU.  The only data of note from the Eurozone today are the German ZEW business sentiment indices and they are expected to be broadly unchanged from the previous month, so the Euro won't get any help there then.
 
UK data comes in the form of the government borrowing figures. A further rise in borrowing levels is expected and that would be negative for the Pound. However, this data's impact is likely to be overshadowed by anything related to the EU membership vote and the conversation at the Euro group meeting in Brussels is likely to emit comments in this regard. Hold on for a 'you need us' attitude from EU leaders towards the UK. Of course the opposite is also true. Sterling is going to be driven by Brexit rhetoric for the next month at least.
 
Other news today will include the New Zealand import and export data, due for release late night UK time. Forecasters are looking for a small rise in exports and a small drop in imports and that has the capacity to strengthen the NZ Dollar overnight. With the GBP-NZD rate trading at some of the highest levels in months, this may be a good day to protect your needs if you are a NZD buyer.
 
And they say hell hath no fury like a woman scorned. It appears it is worse if she is cheated on. This is the one of the most brilliant revenge ploys I have ever seen. It came to light when a man posted on Reddit that his ex-girlfriend, who he cheated on, was sending him spoiler messages ahead of each episode of Game of Thrones. She used new IDs and new images and each time he opened the message, there was another spoiler. She is my new hero. That's war-craft. That is a stroke of genius.
 

New entrant

 
A seven-year-old horse was entered into the Cheltenham Gold Cup but it was the first time he had ever raced. Even more surprising was the fact that he won by a full furlong at odds of 500 to 1. The track officials called the owner into a meeting and the senior steward said, "Your horse is seven years old, has never been in a race of any sort before and yet he romped home by a full furlong in a major race. Can you explain why you haven't raced him before?"
 
"We would have," said the owner, "but he must be slowing down with age because we only managed to catch him on Wednesday."
 

Today's Major Economic Releases 

 
Market BST Data/Event Previous Expected
GBP 09:30 UK: Public sector net borrowing 0.7 0.7
EUR 10:00 EU: German ZEW economic sentiment 11.2 12.1
EUR 10:00 EU: ZEW economic sentiment 21.5 23.4
USD 15:00 US: New home sales 511 521
NZD 23:45 New Zealand: Trade balance 117 25

Daily Currency Insight by David Johnson

Daily Currency Analysis with Micheal Condron

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