Daily Market Update: Brexit doors to manual?
The week ahead will be dominated by the UK’s EU referendum on Thursday.
Opinion polls released over the weekend point to a recovery in the Remain camp’s prospects with the race now neck-and-neck. This follows a period whereby the Leave campaign’s lead had been gaining momentum. The Financial Times’ poll of polls puts the two sides level on 44%. The improvement in the prospects of the status quo remaining has boosted the pound on the currency markets. Indeed, this morning sterling has witnessed one of its biggest rallies of the past decade. Friday’s European open saw EUR/GBP begin the session at 79p, following a push towards 80p on Thursday. This morning the currency pair is changing hands at 77.7p, a fall of 1.6%. Sterling’s moves against the dollar have been even more marked with dollar weakness contributing to the sharp move higher in GBP/USD. The currency pair is currently changing hands at $1.46 this morning, a rise of 2.5% relative to Friday’s open of $1.423. You may recall we saw cable touch $1.401 last Thursday afternoon. Meanwhile EUR/USD has jumped by over a cent since Friday and is currently trading at $1.1340.
Outside of the currency markets, risk appetite has returned with the usual price action on equity and commodity markets. European equities are up between 2-3% in early trading. Meanwhile Brent crude has jumped over 4% since Friday from $48pb to $50pb this morning.
Looking ahead to the week’s events, the economic data releases will play second fiddle to political developments. While all eyes and ears are focussed on Thursday’s EU referendum it is worth noting that Spanish elections take place next Sunday with the far-left (Podemos) expected to make significant gains. In the US, Janet Yellen will deliver her semi-annual monetary policy report to Congress on Tuesday and Wednesday. However, we may not get much new news from this. In the Eurozone, the key economic releases are the ZEW report tomorrow and the flash PMIs on Thursday