What Month for Sterling – 31st May 2016
What month for Sterling
During May Sterling has strengthened by 7.5% against the Australian Dollar, 5.5% against the Euro and NZ Dollar, 4% against the Canadian Dollar and 2.7% against the US Dollar. Every sign points towards Sterling’s recovery being driven by opinion polls pointing to a widening gap in favour of the Remainers at next month’s referendum.
If so, it would explain why Sterling was under pressure this morning ahead of London’s opening. An opinion poll in today’s Daily Telegraph gives Remain 51% of the vote, with Leave on 46%; last week the lead was 13 points. Sterling is still – jointly with the US Dollar – the top performer over the three-day weekend but if that poll gap narrows further it will reawaken Brexit fears and Sterling will feel the heat.
On Friday Federal Reserve chairperson Janet Yellen made a speech that had investors hanging on every word; would she endorse a call for a rate increase in the next couple of months or would she be more cautious? In typically measured language, she confirmed that “probably in the coming months such a move would be appropriate”. Although the comment fell a long way short of telling investors to gird their loins for an increase in two weeks’ time, it was enough to reassure the world that members of the Federal Open Market Committee are all singing from the same hymn sheet.
That reassurance took the US Dollar higher on Friday evening and it found fresh support when the Far East opened yesterday before giving back all or most of its gains during the remainder of the day. Compared with Friday morning’s opening levels the US Dollar is unchanged against Sterling and half a cent firmer against the Euro.
After the long weekend in the UK and US, ecostats today are back with a bang. In the Far East Japan announced a monthly increase in industrial production and an unemployment rate steady at 3.2%. Business confidence improved in New Zealand while building permits enjoyed a bounce in Australia. German retail sales disappointed, falling again in April. This morning will also bring unemployment data from Germany and Euroland as well as the €Z inflation data.
US figures this afternoon cover personal income and spending, house prices and consumer confidence. Quarterly data from Ottawa are expected to show the Canadian economy expanding at an annualised rate of 2.9% in Q1, putting quarterly growth at 0.7%. The equivalent Australian GDP data come out tonight.