The Countdown Begins
With less than 48 hours left for the controversial European Union (EU) referendum vote, the entire financial and political community across the globe remains on high alert. Every little information relating to the two ubiquitous words – Bremain and Brexit, are being viewed with a magnifying glass. As the UK economic calendar is devoid of data today, market participants will have ample time at hand to contemplate the favourable and unfavourable impact of the vote.
In the meantime, markets will look forward to upcoming macroeconomic data from other parts of the world. In the Eurozone, June’s flash estimate of the consumer confidence index is eagerly awaited. Across the Atlantic, the US housing market is in focus today, starting with the monthly update on prices and figures on existing home sales in May, along with round two of the US Federal Reserve (Fed) Chairwoman, Janet Yellen’s testimony.
Pound Sterling – UK Markets
The Pound is trading mixed against the US Dollar and the shared currency this morning. There are no economic releases scheduled in the UK today, a fact that market participants are likely to overlook as the EU referendum polling day is just around the corner. Britain will head to the polls tomorrow, which will ultimately put the prolonged and precarious in-out saga to an end. Over the previous few weeks, Sterling has taken a beating and has also faced a resurrection of sorts over diverging outcomes from an exodus of opinion polls in the run-up to the looming referendum vote. However, recent opinion polls have shown a shift towards keeping Britain within the 28-member trade bloc. On the data front, British manufacturers’ total order book balance unexpectedly improved in June, led by an increase in motor vehicles, transport, food and beverage sector orders. On the other hand, the UK budget deficit widened in May.
Looking ahead, Britain’s BBA mortgage approvals report for May will draw this extremely busy week to a close.
US Dollar – US Markets
The greenback gained ground against its major peers yesterday, after the US Fed Chairwoman, Janet Yellen, expressed optimism about the US economy’s short-term prospects and reiterated her earlier stance of a gradual increase in interest rates. In the first part of her testimony before the US Senate Banking Committee, the Fed Chief assured that a cautious approach to monetary policy remains appropriate amid considerable uncertainty about the economic outlook. Further, Janet Yellen’s longer term outlook for the US was more restrained as she addressed various domestic and foreign issues that could hinder the nation’s growth. She also touched upon the much debated EU referendum topic and warned that a Brexit vote could lead to significant repercussions across the globe.
The US Dollar has erased most of its previous session gains and is trading lower across the board this morning. Today’s US economic calendar includes the nation’s existing home sales, housing price index and the weekly mortgage applications data along with part two of the Fed Chief’s testimony.
Euro – European Markets
The shared currency has trimmed its previous session losses and is trading on a strong footing against its major peers this morning. Looking ahead, the preliminary reading of the Euro zone’s consumer confidence index is due later today and is expected to hold steady in June.
Yesterday, the Euro ended lower against the US Dollar and the Pound, despite data showing that economic sentiment in the Euro zone and Germany improved this month. German economic confidence unexpectedly strengthened to a ten-month high level in June, overlooking an uncertain global backdrop. A separate gauge of current conditions surprisingly rose to a five-month high level during the same month. Meanwhile, the Euro zone’s economic sentiment index advanced in June. Separately, the European Central Bank President, Mario Draghi, underlined the potential risks of Brexit in a speech at the European Parliamentary Committee in Brussels and assuaged concerns by stating that the central bank has contingency plans in place in case the Leave vote prevails.
Other Currencies – Highlights
The Swiss Franc has extended its previous session gains against the greenback this morning amid a broad weakness in the US Dollar. Next of note in Switzerland is the nation’s ZEW economic expectations data for June, scheduled for release in a few hours. In addition to this, the Swiss National Bank will release its quarterly bulletin for the second quarter of this year.
Earlier in the session, data indicated that Switzerland’s trade surplus widened to a three-month high level in May. Separately, another report showed that downturn in Swiss watch exports continued in May. Watches are the nation’s third-biggest export commodity after pharmaceuticals and machinery. The alpine country’s watch sector has witnessed a slowdown in demand from profitable markets such as Hong Kong, China, and Europe. In other economic news, Swiss M3 money supply grew at a slower pace in May.