Brexit campaigns suspended, Britain in shock after MP death

Enrique Díaz-Álvarez17/Jun/2016Currency Updates

Labour MP Jo Cox died after she was attacked in her constituency yesterday. After the tragic event both parties suspended campaigns. In this volatile market, the mere possibility that the attack on the well known remain supporter may have had a political motive was enough to put an end to a sharp Sterling sell off and buoy the currency, on expectations that the leave campaign may suffer as a result.

Swiss National Bank yesterday decided to keep the interest rates unchanged, as expected. Further rate cuts in the future are not ruled out. Additionally, President Thomas Jordan emphasized that Brexit is one of the biggest risks to the outlook, and that SNB is ready to take action in case it takes place.

President of the European Central Bank Mario Draghi will be speaking in Munich at 4pm this afternoon. Investors will be looking for any clues from Draghi regarding the possibility of additional economic stimulus measures from the central bank in the coming months following a prolonged period of near zero price growth in the Eurozone economy. We think that the ECB is in a “wait and see” mode for now, but is ready  introduce additional easing measures as early as its September meeting should inflation in the Eurozone fail to show meaningful improvement in the coming months.

However, focus will remain firmly on next week’s EU referendum, which remains the biggest event risk in the currency markets at the moment. Volatility and overreaction to polls and campaign news will be the order of the day .

Major currencies in detail:


As expected, the Bank of England left the interest rate and the level of Asset Purchase Programme unchanged. Governor Carney in his speech rejected the criticism it has received from the Leave camp due to its gloomy assessment of the consequences of Brexit, and the Minutes of the meeting reiterated these warnings.

Another day of positive macroeconomic data shows Retail Sales in May (YoY) growing much better than expected, 6.0% versus 3.9% estimates.

Sterling trading continues to be volatile and every event related to the referendum brings about a sharp reaction. After dropping through the day, Sterling rebounded sharply on news of the tragic death of Labour MP Jo Cox. 

With no macroeconomic data out in the UK this morning, Sterling traders will remain firmly focused on next Thursday’s EU referendum. There’s now less than a week to go until the vote on EU membership. Volatility in the currency is likely to remain sky high until after the vote, with implied volatility in EUR/GBP having earlier in the week surged to its highest level on record.


European CPI in May (YoY) stayed at -0.1% level as expected. EUR/USD traded in a volatile fashion, roughly tracking Sterling moves against the US dollar. The common currency is also increasingly driven by expectations on the result of next week’s referendum.

Current account data for the Eurozone this morning is unlikely to rock the boat. However, any comments from Mario Draghi this afternoon on monetary policy would no doubt influence the Euro later today.


Core CPI in May (YoY) came out as  expected (2.2%), and remains the highest among major G10 countries. Jobless claims, both initial and continuing were in line with last week levels and experts’ expectations. Philadelphia Fed Manufacturing Index (which results cover business conditions in Pennsylvania, Delaware and New Jersey region) beat expectations by a mile. The very good result (4.7 in July) indicates strong factory-sector growth.

After a relatively sharp increase today US Dollar Index fell and stabilized at its opening level. We expect the volatility of USD to remain very high in the coming days, due to the Brexit referendum.

With limited economic data out of  the US economy this afternoon, the US Dollar will likely be driven by news from across the Atlantic, including next week’s referendum and Draghi’s speech.

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Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.