Brexit concern and weakening growth outlook in focus – MUFG

Lee Hardman, Currency Analyst at MUFG, suggests that the pound and the euro to a lesser extent remain under downward pressure against the other major currencies as the market continues to build in a higher Brexit risk premium.

Key Quotes

“It has resulted in cable breaking below the 1.4000-level for the first time since early in 2009 during the peak of the global financial crisis. The next key support level which is coming into the market’s focus is just above the 1.3500-level which was the low from January 2009. It is also notable that the euro is weakening alongside the pound as Brexit risk continues to intensify which is weakening its inverse correlation with global investor risk sentiment. 

The euro was undermined as well yesterday by the release of the weaker than expected German IFO survey for February which recorded its largest two month decline since July 2012. The survey has added to evidence signalling that the euro-zone economy appears to have lost some growth momentum early this year which strengthens the case for more aggressive ECB monetary easing next month.”