Opinion Polls Send Sterling Lower – 16th March 2016

Investors reacted to two UK opinion polls yesterday by selling Sterling on the basis that a Brexit is negative for the UK and therefore Sterling. The main one sponsored by a national newspaper, gave the leave vote a narrow edge of 49% compared to the stay vote of 47% with 4% undecided. For the sake of balance (and because it is also Cheltenham week), the bookmakers still have the odds against Brexit at 2/1.

Actions by investors led to Sterling being Tuesday’s worst-performing major currency, falling by one Euro cent and by one and a half US cents. Against everything else it lost an average of 0.5% but it wasn’t enough to pick up the wooden spoon. The South African Rand (a non-major currency) made Sterling look good; it fell by 2.4% against the US Dollar on news the country’s credit rating could be downgraded.

Tuesday’s two other under performers were the Norwegian Krone and the NZ Dollar but both managed to stay ahead of Sterling but not by much. The Krone’s problem was oil and the Kiwi’s milk as the prices of both commodities fell.

It is a big day ahead for Sterling and the US Dollar today. First Sterling will be challenged by the UK employment data and then by the Chancellor’s budget speech shortly after midday. This evening the Federal Reserve chairperson hosts a press conference. Although UK budgets do not usually upset Sterling, the Office for Budget Responsibility’s economic projections can. A downgrade to growth is on the cards today but Sterling would be likely to suffer if it were more than expected.

No change to US interest rates is anticipated at six this evening. However, Janet Yellen will be facing journalists half an hour later and they will push her, inevitably, for guidance on where rates are going, and when.