Global Sentiment Improves, Pound Steadies - Investec
Research Team at Investec, suggests that after a sustained period of
risk aversion in financial markets it was a sigh of relief to see 'risky
assets' perform better yesterday.
“The Euro and Japanese Yen continued to weaken from multi-month highs against the greenback, while commodity-linked currencies such as the Australian and Canadian Dollars strengthened after some sustained weakness of late. Despite this improvement in sentiment, GBPUSD and GBPEUR continue to trade range bound and we are noticing clients taking a more cautious approach ahead of the EU Referendum vote in June.
Many are still assessing their budget rates and carefully evaluating the various options available to them, delaying their decision making. We anticipate a flux of activity going into the event in June due to the feel that we get from our clients and previous events such as the Scottish Referendum and the last UK General Election.
The Pound continues to be quite robust trading within the top quadrant of its 1.40 - 1.46 broad range against the US Dollar. This is quite surprising given the weak trade data yesterday and the likelihood of a downgrade to UK growth forecasts at tomorrow's quarterly inflation report. There is an outside chance of somebody on the committee voting for a rate cut - and that's before we factor in the risk premium for next month's EU Referendum in 43 days’ time. Yes, I'm going to count down every day, so brace yourself for that.”