Sterling rally halted following release of latest referendum poll

Matthew Ryan01/Jun/2016Currency Updates

The Pound eased on Tuesday, with the UK currency hurt by the release of the latest ICM poll which showed a very narrow advantage for the vote to ‘leave’ at this month’s EU referendum.

Sterling slipped against both the Euro and the US Dollar after the telephone poll showed a three percentage point lead in favour of a Brexit at 45% to 42%.

This reversal of expectations is indicative of the general uncertainty surrounding the referendum and businesses should consider the impact this uncertainty is likely going to have on both the Pound and Euro. Due to recent Sterling and Euro volatility we’re seeing a large number of our UK clients hedging against the exchange rate risks in the run-up to 23 June.

The Euro was given a slight boost by a generally impressive set of economic data out of the Eurozone economy yesterday. Euro-area inflation improved in May, albeit remaining in negative territory, while unemployment in Germany fell to a record low. This should provide some encouragement for the European Central Bank which is scheduled to meet for its monetary policy meeting on Thursday.

There was some slightly more downbeat economic news in the US economy, with consumer confidence slipping to its lowest level in six months. However, the US Dollar still managed to notch its best month in six in May.

Expectations that the Federal Reserve will hike interest rates at either this month or next month’s Federal Open Market Committee meeting has sent the US Dollar index sharply higher in the past month or so.

This week will undoubtedly be dominated by Thursday’s ECB announcement and Friday’s labour report in the US. We have low expectations for the former, with the latter likely to provide a strong indication as to whether we’ll get a second post-financial-crisis hike at the Fed’s June meeting. In the meantime, manufacturing growth in the Eurozone, UK and US could impact the major currencies today.

Major currencies in detail:


A late slump following the release of yesterday’s ICM referendum poll sent Sterling 0.8% lower against the US Dollar on Tuesday.

The referendum poll ramped up uncertainty again ahead of this month’s referendum, which remains far from a foregone conclusion, according to the majority of recent opinion polls. The fact that Tuesday’s poll was conducted via telephone vote carries extra significance as telephone polls have generally shown a comfortable bias towards the vote to ‘remain’.

Today’s manufacturing PMI is expected to show a modest rebound, although it looks set to remain below 50, which is the level that represents contraction. This could further amplify concerns over a second quarter economic slowdown in the UK.


Despite some overall improvements in economic data, the Euro was unchanged versus the US Dollar on Tuesday.

Headline inflation in the Eurozone remained stuck in negative territory in May, although it showed a very modest improvement on a month previous. Consumer price growth edged up to -0.1% from -0.2%, with most of the movement down to a smaller decline in energy prices. The core measure also increased very slightly, rising to 0.8% from 0.7%.

A lack of inflationary pressure in the Eurozone remains a significant issue for the ECB in its quest to reinvigorate growth in the single currency bloc.

The labour market also continued to show a modest improvement in May. Overall unemployment remained unchanged at a seven-year low of 10.2%, with the jobless rate in Germany falling to a record low 6.1%.

Manufacturing PMIs this morning could prove a market mover, although all attention will be on tomorrow’s ECB meeting.


The US Dollar ended 0.1% higher against its major peers yesterday.

Consumer confidence in the US fell in May, with Americans concerned that jobs may become more difficult to find in the coming months. The latest index from the Conference Board declined to 92.6 from 94.7, its lowest level since November last year.

Much more encouragingly, consumer spending rose at its fastest pace in nearly seven years in April, jumping by 1% from a month earlier. This is the latest sign that US economic growth in the second quarter likely accelerated from its sluggish start.

Manufacturing growth from both Markit and ISM this afternoon will be focal points for the US Dollar, although traders will have one eye on Friday’s labour report.


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Written by Matthew Ryan

Strategy Analyst at Ebury. Providing expert currency analysis so small and mid-sized businesses can effectively navigate international markets.