Brexit Poll Sparks FTSE Sell-Off
• FTSE attempts to break out of range
• ICM poll sends sterling and FTSE lower
• US data support summer rate hike
What looked like a boring day in the markets has been kicked into gear
as the European indices fell sharply after a surprise EU referendum poll
in favour of the ‘leave’ campaign. Most notably, with the FTSE
attempting to break out of its 30 point range that has dominated the
past week, this could set the groundwork for a very volatile week. Today
has seen a substantial amount of data released, and with a whole week
of economic data risk ahead, traders will be wary of increased
unpredictability in the coming days.
Another day, another EU referendum poll. However, this time it was
different, with the ICM phone poll providing a big swing in favour of
the ‘leave’ campaign. Widespread selling for sterling and an immediate
flight to safety signifies the fact that markets have been caught
napping with an overconfidence that every poll would come out in favour
of the ‘remain’ campaign. However, it is worth noting that ICM surveys
typically do favour a Brexit, with phone polls often coming out more
heavily on the ‘leave’ side too. As such, while this will be a worry to
some, the real test is whether the likes of the Ipsos MORI or ORB polls
can be turned around. With IG clients currently showing a 77%
chance that the UK will remain within the European Union, it is clear
that today’s poll may be an outlier rather than the average.
At a time when markets have been seemingly focusing on the positives of a
stronger economy rather than the looming possibility of a rate hike,
today’s data highlights the fact that while a hike is likely, consumers
may not feel so optimistic. Today’s rise in the Fed preferred core PCE
measure of inflation paves the way for a potential hike in the summer,
yet with consumer confidence on the wane, it is clear the everyday
person is not looking forward to the prospect of higher rates.
