Today was a relatively light day for data with the main focus being UK’s potential exit from EU.
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German IFO business climate came out worse than expected at 105.7 from the forecast 107. This marks its sharpest drop since 2008 and third drop in a row. The main reason for this resides in the fall in demand for German goods in emerging markets. This leaves business morale at one of the lowest levels in well over a year. Sterling didn’t drastically move on the back of this.
In the afternoon, US consumer confidence figures came out worse than expected at 92.2 from forecast 97.4, yet Existing Home Sales were better than expected at 5.47m from forecast 5.37m.
Talk of the ‘Brexit’ from EU filled the headlines for the rest of the day and as a result Sterling weakened across the board. In light of Boris Johnson’s comments, other key political figures have offered their view. For instance, Vince Cable, who is pro remaining in the EU, rejects the idea that businesses are hampered by extra EU regulation and that leaving would not make it easier to make bilateral trade deals. Alan Johnson also warns of the huge job losses if UK leaves.
Mark Carney today asserted that if the economy needed additional stimulus, cutting rates towards zero will be an option, yet stopped short of introducing negative interest rates in UK saying the bank had ‘absolutely no intention’ of doing so.
Key data to look out for this week are US crude oil inventories tomorrow, UK second estimate GDP, US core durable goods and unemployment claims on Thursday and US GDP on Friday.
Latest FX news by Joe De Berniere