Yesterday the Pound found a little bit of support that was not referendum related as it was reported that British unemployment fell once again, this time to levels not seen in more than 10 years. The unemployment rate fell to 5% and employment rose hitting 74.2% the highest level since records began. Wages are also on the rise as earnings rose by a more than expected 2.3%. So despite the uncertainty surrounding the referendum next week it would seem that the UK economy is still fairly robust. The Pound was supported after the upbeat releases however attention will surely return to the vote as traders continue to be swayed by the latest opinion polls.
Overnight the dollar lost ground following a dovish Federal Reserve meeting. The FOMC continued to sound optimistic about the outlook for the US economy despite the recent downturn in employment, noting the pickup in growth and consumer spending. The accompanying dot graph continued to show that the base case was for 2 rate hikes this year. However, the number of members expecting only one rate hike this year has risen from 2 to 6 and the Fed are now only anticipating 3 rate hikes in 2017 rather than 4 only 1 month ago. Markets believe that there will only be one rate hike later this year and the dollar does look vulnerable in the short term.
Today we await Retail sales data from the UK and there is of course an interest rate announcement from the Bank of England. Markets are unlikely to pay much attention on the BOE rate decision as developments since the last decision when the bank unanimously decided to leave policy on hold have done little to change the outlook for activity and inflation. Furthermore the focus remains on next week's Brexit vote. It has already been reported this morning that the respected Ipsos/Mori poll has the Leave camp 6 points ahead with a week to go before the actual vote. It's too close to call at the moment particularly with the amount on undecided voters. Volatility will increase over the next week so there will be opportunities for buyers and sellers to enter the market at extended levels. Please do call your Halo Financial consultant to discuss your requirements.
FX Research by Ricky Nelson
Daily Currency Analysis with Denzil Rickerby
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