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Pound Recovery May Continue as Markets Shrug Off Brexit Fears

Pound Recovery May Continue as Markets Shrug Off Brexit Fears

Talking Points:

  • Markets likely to be more responsive to upbeat vs. disappointing UK PMI data
  • Strong results on 5-year UK bond sale hints traders looked past “Brexit” fears
  • Yen fell as Aussie, NZ Dollars rose amid risk appetite recovery in Asian trade

UK PMI data headlines the European data docket. The catch-all Composite index is expected to show the pace of manufacturing- and service-sector activity growth slowed in February after hitting a six-month high in January.

Soft factory-sector and construction PMIs earlier in the week failed to stymie a British Pound recovery. The currency posted the latest daily gain versus the US Dollar in a month in yesterday’s trade after demand rose and yields declined at an auction of five-year bonds, pointing to investors’ confidence despite the looming “Brexit” referendum.

This coupled with an already steep slide in the priced-in BOE rate hike outlook and build-up in speculative net-short exposure is likely to make the UK unit relatively resilient in the face of negative news flow. Alternatively, an upside surprise may fuel unwinding of short GBP positioning, extending the currency’s recovery.

The anti-risk Japanese Yen underperformed while the sentiment-geared Australian and New Zealand Dollars traded higher alongside Asian stock markets as the markets’ mood brightened in overnight trade. The MSCI Asia Pacific regional benchmark equity index rose 0.8 percent.

Losing Money Trading Forex? This Might Be Why.

Asia Session

21:45NZDValue of All Buildings SA (QoQ) (4Q)2.5%2.0%0.7%
22:30AUDAiG Perf of Services Index (FEB)51.8-48.4
00:00NZDANZ Commodity Price (FEB)0.4%--2.3%
00:30AUDTrade Balance (JAN)-2937M-3200M-3524M
01:30JPYBOJ Nakaso speaks in Naha ---
01:45CNYCaixin China PMI Services (FEB)51.2-52.4
01:45CNYCaixin China PMI Composite (FEB)49.4-50.1
02:00JPYNikkei Japan PMI Services (FEB)51.2-52.4
02:00JPYNikkei Japan PMI Composite (FEB)51.0-52.6

European Session

07:00GBPNationwide House Px (MoM) (FEB)0.4%0.3%Medium
07:00GBPNationwide House Px (YoY) (FEB)4.9%4.4%Medium
08:30GBPHalifax House Prices (MoM) (FEB)0.0%1.7%Low
08:30GBPHalifax House Price (3M/Y) (FEB)10.4%9.7%Low
08:45EURMarkit/ADACI Italy Services PMI (FEB)52.853.6Low
08:45EURMarkit/ADACI Italy Composite PMI (FEB)-53.8Low
08:50EURMarkit France Services PMI (FEB F)49.849.8Low
08:50EURMarkit France Composite PMI (FEB F)49.849.8Low
08:55EURMarkit Germany Services PMI (FEB F)55.155.1Medium
08:55EURMarkit/BME Germany Composite PMI (FEB F)53.853.8Medium
09:00EURMarkit Eurozone Services PMI (FEB F)53.053.0Medium
09:00EURMarkit Eurozone Composite PMI (FEB F)52.752.7Medium
09:30GBPOfficial Reserves Changes (FEB)-$527MLow
09:30GBPMarkit/CIPS UK Services PMI (FEB)55.155.6High
09:30GBPMarkit/CIPS UK Composite PMI (FEB)55.756.1High
10:00EUREurozone Retail Sales (MoM) (JAN)0.1%0.3%Medium
10:00EUREurozone Retail Sales (YoY) (JAN)1.3%1.4%Medium

Critical Levels

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

--- Written by Ilya Spivak, Currency Strategist for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.