This Pound Sterling exchange rate update will address the factors that are likely to affect rates this week and in the run up to the EU Referendum.
The Pound continues its run of intense volatility as we approach 23rd June with new developments by the day. Britain’s most read daily newspaper the Sun has now backed the Leave campaign with its front page headline in yesterday’s paper BeLeave in Britain. With the Leave campaign gaining momentum, the markets are adjusting accordingly to the increased likelihood that Britain may now in fact withdraw from the EU which is putting continued pressure on sterling exchange rates.
With liquidity in the financial markets starting to dry up and stock markets crashing to the lowest levels since February, the Bank of England have made the decision to offer additional liquidity auctions. Two have been planned before the referendum and one after. The first took place yesterday with British banks tapping the Bank of England for almost £2.5 billion. The growing uncertainty is playing out into the currency markets with wild swings across the board in what may become one of the most volatile periods.
There is an increasing awareness that Brexit carries the risk of an interest rate cut and this is being reflected in the price of the Pound. Global economic and political concerns and in particular the Brexit scenario are now pushing back expectations of a first UK rate rise until 2019.
With a Brexit on the cards there is now potentially a 50% chance the next rate adjustment will be down which should keep pressure on the Pound.
The Bank of England meeting tomorrow is unlikely to see any changes at all - Focus will instead be on contingency planning for next week.
The European Court of Justice ruled yesterday that Britain can deny family allowances to foreign workers who have children abroad which can it says be justified in order to protect public finances. Whilst this is welcome news for the Remain campaign, it is questionable whether at this stage this will have any impact on winning over votes. George Osborne today has stated a vote to Leave will force him to increase taxes and cut spending.
UK Consumer Price Index inflation numbers released yesterday remained steady at 1.2% on the year although went largely unnoticed with all the other news despite coming in slightly weaker than expected. This morning sees UK unemployment numbers although no change is expected with the headline figure believed to hold steady at 5.1%. The British referendum will continue to be the main driver for Sterling exchange rates.
For more information about how the EU Referendum could affect your currency requirement please call our foreign currency brokers on 01494 725353. If you would like to ask me a question about anything you have read in this report you can email me directly at email@example.com.
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