The Pound endured mixed fortunes against the majors at the beginning of the week, falling to a fresh two month against the Euro at 1.2513.
Sentiment towards the British pound exchange rates turned more bullish on Wednesday after the latest ILO Unemployment Rate showed a surprise drop from 5.1% to 5.0%.
This stronger showing, coupled with a lack of slowing in average weekly earnings growth, helped encourage traders to buy back into the GBP exchange rate today.
The British pound has continued to fluctuate against its exchange rate peers today, thanks to the latest forecasts for the national economy.
The EU Referendum has been tied closely into these forecasts, with the latest predictions coming from Capital Economics’ Roger Bootle. Speaking earlier, Bootle argued that ‘Brexit’ war more likely to actually harm Europe than it was the UK.
Sentiment towards the Pound improved somewhat on Tuesday morning even though the May UK Consumer Price Index did not show the increase in inflationary pressure that markets had been hoping to see.
However, the outlook of the British currency remained muted due to the heightened odds of a ‘Brexit’, preventing it from regaining ground against rivals such as the US Dollar and Australian Dollar.
The UK currency also suffered further losses against the U.S Dollar, testing lows under the 1.41 level.
It was a similar pattern against all of the 16 most actively traded currencies with market sentiment dominated by speculation surrounding the EU referendum and the chances of a UK exit.
The GBP/AUD exchange is moving towards lows in the region of the 1.90 level, while the Pound actually traded under the 2.00 level versus the New Zealand Dollar for the first time this year
The ingoing market volatility is a product of the uncertainty and with nine days remaining until the crucial vote, the momentum is certainly with the Leave campaign.
The Pound’s volatile run up to the referendum is intensifying and the UK currency fluctuated on Monday as the sense of anxiety about next week’s vote continues to build.
Here are the latest FX rates:
On Friday the Euro to British Pound exchange rate (EUR/GBP) converts at 0.856
The GBP to EUR exchange rate converts at 1.168 today.
The live inter-bank GBP-USD spot rate is quoted as 1.241 today.
The GBP to AUD exchange rate converts at 1.939 today.
NB: the forex rates mentioned above, revised as of 19th Apr 2024, are inter-bank prices that will require a margin from your bank. Foreign exchange brokers can save up to 5% on international payments in comparison to the banks.
Implied Volatility for the Pound Rose to a Record High on Divergent Opinion Polls
After recording new lows against the majors, the Pound bounced back in fine style during the afternoon, gaining more than 1% against the Dollar and the Euro after one poll put the remain camp 10 percentage points ahead and was shared on twitter.
However, the declines resumed later in the session after an ICM poll for the Guardian showed a six point lead for the leave camp and a measure of implied volatility in the Pound climbed to a record high.
Liquidity levels are getting thinner with traders reluctant to act before the result of the referendum on June 23rd.
By the end of trading, four polls from three companies put the Leave vote ahead of remain and the Sun newspaper also backed Brexit on its front page, underlining Rupert Murdoch’s personal stance on the referendum.
Pound Sterling (GBP) Volatility Forecast to Increase in the Days Ahead
There is evidence amongst voters that the Remain argument, which focuses on the economic impact of a UK exit, is failing to ring a chord with voters who are swaying towards the argument that the UK can prosper outside of the EU.
The former Labour party Prime Minister Gordon Brown made an impassioned plea to voters not to turn their back on the EU and we are expecting a similar speech from the current leader Jeremy Corbyn today.
The polls indicate we are hurtling towards a Leave vote with all of the uncertainty that will bring but the bookmakers still believe a remain vote is the more likely scenario. What we do know is that the volatility in the market that we seen yesterday is only likely to increase in the days ahead.
Data Released 14th June
U.K 09:30 CPI (May)
- Ex Food & Energy
U.K 09:30 PPI (May)
EU 10:00 Employment (Q1)
EU 10:00 Industrial Production (April)
U.S 11:00 NFIB Business Optimism (May)
U.S 13:30 Import / Export Prices (May)
U.S 13:30 Retail Sales (May)
U.S 15:00 Business Inventories (April)