- Sterling (GBP) Climbs on Decreased ‘Brexit’ Bets – But ‘Leave’ leads in web polls
- Underwhelming CPI Dents Pound – Sterling remains sturdy as some economists expected drop
- US Dollar Slips on Mixed Data – Monday’s Empire manufacturing and NAHB housing down
- Forecast: US CPI in Focus – Alongside weekly earning and housing data
The Pound Sterling to US Dollar (GBP/USD) exchange rate rallied throughout Monday as markets reacted to new EU referendum polls suggesting a stronger lead for the ‘Remain’ campaign. However, Sterling dropped again on Tuesday in response to poor domestic CPI.
On Tuesday, GBP/USD looks to be around 100 pips up from the week’s opening levels after hitting a new weekly high of 1.4518. At the time of writing the pair was trending in the region of 1.4480.
Pound (GBP) Strengthens Once Again on Decreased ‘Brexit’ Bets
The Pound rallied on Monday evening after British news websites began publishing new polls indicating a stronger lead in the EU referendum’s ‘Remain’ campaign. The key poll for the movement looks to be The Telegraph’s latest ORB poll;
‘This week’s ORB poll reveals an increase in public support for Remain countered by an almost proportional fall in support for Leave.
Among all respondents, 55 per cent now say they support Remain – an increase of 4 points since the previous ORB poll in April – and 40 per cent back Leave – a 3-point decrease.’
While turnout continues to be an issue for ‘Remain’ voters, the report generally indicates that ‘Remain’ support has strengthened since April while ‘Leave’ support weakened. As a result, investors fearing an uncertain future for the Pound became hawkish.
However, the Pound’s rally was dented by underwhelming Consumer Price Index (CPI) data released on Tuesday morning. The monthly print let down forecasts of 0.3% by dropping from 0.4% to 0.1%, while the yearly score failed to hold at 0.5%, falling to 0.3%.
Sterling slumped but didn’t plummet however, as some economists had expected the slowing as air fares and clothing prices dropped throughout April.
US Dollar (USD) Left Uninspired by Monday’s Mixed Data
The US Dollar saw little strength on Monday after data disappointed investors. May’s Empire manufacturing report saw its April score of 9.56 followed up with a shocking contraction of -9.02, letting down forecasts of merely slowing to 6.50 and reminding markets that US manufacturing is still struggling.
The latest NAHB housing market index report also disappointed, dropping from 58 to 57.3 despite estimates that it would instead gain to 59.
However, the US Dollar could have fallen further if not for March’s more optimistic net long-term TIC flows report, which showed an improvement from $72.6b to $78.1b.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: US CPI Due Tuesday
The GBP/USD exchange rate could be set to see further movement on Tuesday with the United States’ highly anticipated Consumer Price Index (CPI) reports due for release in the afternoon.
US CPI is forecast to accelerate from 0.1% to 0.3% month-on-month, while the yearly print is expected to improve from 0.9% to 1.1%.
The report will also be accompanied by housing start, building permit and weekly earnings reports, followed later by industrial and manufacturing production reports.
Sterling, on the other hand, will see continued movement during Wednesday’s session with a slew of employment data due for release in the morning.
The Pound Sterling to US Dollar (GBP/USD) exchange rate currently trends around 1.4480 while the US Dollar to Pound Sterling (USD/GBP) exchange rate trends in the region of 0.6904.
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