Sterling One Year on from Referendum

Rate movement was relatively limited yesterday in light of a fairly quiet calendar. Sterling drifted slightly higher against the euro and the dollar. The dollar was better bid against the euro and inched towards 1.1140. Initial Jobless Claims were slightly higher than forecast but remain low, indicating a strengthening labour market.

Previous Day's Market Highlights

Rate movement was relatively limited yesterday in light of a fairly quiet calendar. Sterling drifted slightly higher against the euro and the dollar. The dollar was better bid against the euro and inched towards 1.1140. Initial Jobless Claims were slightly higher than forecast but remain low, indicating a strengthening labour market.
 
The Canadian dollar jumped over 0.4% against the pound yesterday afternoon as Retail Sales surprised to the upside. Sales were up 0.8% and core sales were up 1.5%, versus forecasts of 0.7%. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1393 1.1554 1.1277 2.40%
GBP / USD 1.2725 1.2978 1.2589 2.30%
EUR / USD 1.1172 1.1296 1.1109 1.66%
GBP/AUD 1.6814 1.7494 1.6612 5.04%
GBP / NZD 1.7459 1.8406 1.7400 5.47%
GBP / CAD 1.6821 1.7536 1.6721 4.64%

Today's Market Highlights

Attention this afternoon will largely be on Canadian CPI after the Bank of Canada recently took a more hawkish tone (13:30 BST). US releases include Manufacturing and Services PMI and New Home Sales (14:15, 15:00 BST).
 
Today marks one year since the UK’s EU Referendum. The pound is currently down around 13% against the euro and 15% against the dollar since the evening of 23 June last year. 


Sterling was blindsided when it became clear that the UK had voted to leave the EU. Another shock came in October, when a flash crash saw the pound hit new lows. Sterling fell to its lowest levels against the dollar since 1985.
 
While there have been opportunities for the pound to recover some ground since then, it has recently come under renewed pressure after Theresa May’s election gambit failed and BoE Governor Carney continued to strike a dovish tone on the possibility of raising interest rates despite rising inflation. 
 
Further volatility is likely. Ongoing risks to the pound include current political uncertainty and Brexit negotiations. Looking further ahead, expectations that the UK might pursue a softer Brexit or establish a transitional period could support the pound. Additionally, the BoE has seen rising dissent over whether to keep policy on hold, and a more hawkish Bank later in the year could provide another possible opportunity for sterling strength.

Today's Economic Calendar

Time Currency Release Consensus Previous
13:30 CAD CPI YoY (May) 1.5% 1.6%
13:30 CAD Core CPI - Common YoY (May) 1.4% 1.3%
13:30 CAD Core CPI - Trim (May) 1.3%
13:30 CAD Core CPI - Median (May) 1.6%
14:45 USD Markit Manufacturing PMI (Jun) 53.0 52.7
14:45 USD Markit Services PMI (Jun) 53.7 53.6
15:00 USD New Home Sales MoM (May) 0.600M 0.569M