Polls and the eventual counting of votes will determine direction in GBP heading into June 23. A ‘remain’ outcome will see pound rally to around 1.50 against the dollar, while a ‘leave’ vote will see pound fall to around 1.30 against the dollar, and also see strength in yen.
GBP Analysis
Interest Rate
Official Bank Rate: 0.50%
Last Change: March 5, 2009 (1.00%)
Expected Future Change: Increase (Q1 2017)
Next Release: July 14
Inflation
Inflation Target: 2%
Period: Year ending May 31
CPI: 0.3% Prior: 0.3%
Core CPI: 1.2% Prior: 1.2%
Next Release: July 19
Employment
Period: May (CCC), April (UR, AWE)
Claimant Count Change: -400 Expected: 0
Unemployment Rate: 5.0% Expected: 5.1%
Average Weekly Earnings 3m/yy: 2.0% Expected: 1.7%
Next Release: July 20
Growth
Period: Q1
Second Estimate GDP: 0.4% Expected: 0.4%
Next Release (Final Estimate): June 30
Volatility in GBP has increased as the referendum approaches. This is likely to continue until the votes are counted and the winner is declared. Cable declined then retraced over 600 pips between the 8th and 21st June.
Given the attention on the polls and the potentially massive ramifications of the referendum, economic data has caused little reaction in FX. Employment figures released on June 15 were solid with Average Hourly Earnings beating estimates at 2.0% versus expectations of 1.7%. 400 people left unemployment benefits and the UR dropped to 5.0%.
Inflation measures for May saw Core CPI slightly miss estimates at 1.2% y/y versus 1.3% expected. Headline CPI also missed at 0.3% y/y.
The June MPS was largely a non-event with all members still voting to keep rates unchanged. The BoE clearly need to wait until after the referendum to send signals about future monetary policy.
