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Market Sentiment Unfazed as British Pound Drops on Brexit Fears

Market Sentiment Unfazed as British Pound Drops on Brexit Fears

Ilya Spivak,

Talking Points:

  • British Pound drops after London Mayor Boris Johnson backs “Brexit”
  • Yen declines, Aussie and Kiwi Dollars rise as risk appetite firms in Asia
  • Soft Eurozone PMI data may punish Euro, amplify rebound in sentiment

The British Pound slumped at the start of the trading week after London Mayor Boris Johnson said he would campaign for the UK to leave the EU ahead of a referendum on membership in the regional bloc set for June 23. A recent poll showed Johnson is second only to Prime Minister David Cameron in influencing likely voters.

The threat of political instability in the UK did not spill over into broader risk aversion however. In fact, sentiment firmed across Asian bourses, with the Australian and New Zealand Dollars following shares upward while the anti-risk Japanese Yen declined.

Looking ahead, S&P 500 futures are pointing firmly higher to hint that the risk-on mood is set to continue. The preliminary set of February’s Eurozone PMI figures headlines the data docket. The region-wide composite gauge is expected to show a slowdown in manufacturing- and service-sector growth.

News-flow from the common currency area has increasingly underperformed relative to consensus forecasts over recent weeks. This opens the door for a downside surprise, which may amplify speculation on an expansion of ECB stimulus measures to be announced after next month’s policy meeting.

The prospect of a larger-scale easing effort is likely to weigh on the Euro. An increase in global monetary accommodation may also reinforce the recovery in sentiment, compounding pressure on the Yen while offering added support to commodity-bloc FX.

Are FXCM traders buying or selling the US Dollar vs. major currencies? Find out here !

Asia Session

22:10AUDRBA's Debelle Speech in Sydney ---
01:45CNHMNI February Business Indicator 49.952.3
02:00NZDCredit Card Spending (MoM) (JAN)2.3%--0.8%
02:00NZDCredit Card Spending (YoY) (JAN)8.9%-7.4%
02:00JPYNikkei Japan PMI Mfg (FEB P)
05:00JPYSupermarket Sales (YoY) (JAN)-0.0%
07:00JPYConvenience Store Sales (YoY) (JAN)-1.4%

European Session

08:00EURMarkit France Mfg PMI (FEB P) 49.950.0Medium
08:00EURMarkit France Services PMI (FEB P) 50.350.3Medium
08:00EURMarkit France Composite PMI (FEB P) 50.350.2Medium
08:00CHFMoney Supply M3 (YoY) (JAN)-1.6%Low
08:00CHFTotal Sight Deposits (FEB 19)-473.4BLow
08:00CHFDomestic Sight Deposits (FEB 19)-409.2BLow
08:15CHFProducer & Import Prices (MoM) (JAN)-0.3%-0.4%Low
08:15CHFProducer & Import Prices (YoY) (JAN)-5.2%-5.5%Low
08:30EURMarkit/BME Germany Mfg PMI (FEB P) 51.952.3Medium
08:30EURMarkit Germany Services PMI (FEB P) 54.755.0Medium
08:30EURMarkit/BME Germany Composite PMI (FEB P) 54.154.5Medium
09:00EURMarkit Eurozone Mfg PMI (FEB P) 52.052.3Medium
09:00EURMarkit Eurozone Services PMI (FEB P) 53.453.6Medium
09:00EURMarkit Eurozone Composite PMI (FEB P) 53.353.6Medium
11:00GBPCBI Trends Total Orders (FEB)-12-15Low
11:00GBPCBI Trends Selling Prices (FEB)01Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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