Janet Yellen delivered her Monetary policy report yesterday and warned of the significant repercussions to the global economy if the UK withdrew from the EU.

UK Referendum impact on USD

Fed Chairlady Janet Yellen delivered a Monetary Policy Report to the Congress yesterday afternoon, and said that a vote for the UK to leave the EU could have significant repercussions to the global economy and would almost certainly affect the US outlook. She spoke of her concerns that, if the UK votes for a Brexit tomorrow, investors would plough their funds into the USD and other safe haven currencies, creating huge USD strength. This would make it even more expensive for US Manufacturers and Exporters to make sales across the globe, areas of which are already struggling.

She then went on to suggest that Interest Rates are likely to remain below the expected levels for some time, but before any further tightening of the economy they must first establish whether growth and unemployment have rebounded, and wait to find out the fate of the UK and the EU. Last month showed a sharp slowing of new jobs created, at only 38,000, the fewest reported since 2010. Yellen assured the Congress that the Committee will be monitoring all economic activity closely during this volatile period. This prompted the question of whether a US recession is on the cards if Britain does leave the EU, to which Yellen’s reply was rather vague as they ‘just don’t know what will happen’.

Data could point towards next Interest Rate decision

Tomorrow at 1.30pm will show the latest set of Initial jobless claims data, followed by Manufacturing Purchasing Managers Index. It is unlikely that this data will have much of an impact on the Greenback as the Referendum continues to dominate the currency markets, but if these figures disappoint it may well back up Janet Yellen’s doubts over an Interest Rate hike any time soon.

Tomorrows EU Referendum will likely impact your exchange rate requirements, feel free to talk to one of us today on 01494 725 353 if you have any concerns, or email me here.


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