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British Pound Drops on Brexit Fears, Yellen Speech in Focus Ahead

British Pound Drops on Brexit Fears, Yellen Speech in Focus Ahead

Ilya Spivak,

Talking Points:

  • British Pound slumps vs. majors as latest polls revive “Brexit” jitters
  • Comments from Fed’s Mester help US Dollar bounce after brutal drop
  • All eyes on Fed Chair Yellen following May’s grim employment data

The British Pound underperformed in overnight trade after a new round of polls showed voters are warming up to the idea of the UK leaving the European Union ahead of a referendum on membership later this month. A YouGov poll returned a 45 versus 41 percent split in favor of “Brexit”, while a separate TNS survey showed a 43 to 41 percent preference for leaving.

The US Dollar rose against all of its top counterparts in a move that appeared to be corrective after the currency suffered the largest drop in over two years on Friday. The selloff followed deeply disappointing set of labor-market figures that weighed against near-term rate hike speculation.

Supportive comments from Cleveland Fed President Loretta Mester over the weekend may have likewise helped the greenback. Mester said that while the jobs data was a disappointment, policymakers can’t read too much into one number. She added that the report did not fundamentally alter her outlook, with the economy “definitely” moving in the right direction.

Looking ahead, a relatively quiet economic calendar in European trading hours is likely to see markets looking ahead to scheduled commentary from Fed Chair Janet Yellen. Falling back on the central bank’s commitment to “data dependency” is likely to be seen as dovish, weighing on the greenback. Alternatively, rhetoric suggesting the Fed intends to look past May’s report as a one-off anomaly may offer a lifeline to the battered benchmark unit.

Asia Session

1:00AUDMelbourne Institute Inflation (MoM) (MAY)-0.2%-0.1%
1:00AUDMelbourne Institute Inflation (YoY) (MAY)1.0%-1.5%
1:30AUDANZ Job Advertisements (MoM) (MAY)2.4%--0.6%

European Session

6:00EURGermany Factory Orders (MoM) (APR)-0.5%1.9%Medium
6:00EURGermany Factory Orders (YoY) (APR)0.6%1.7%Medium
7:30EURMarkit Germany Construction PMI (MAY)-53.4Low
8:00GBPNew Car Registrations (YoY) (MAY)-2.0%Low
8:00CHFTotal Sight Deposits -494.1bLow
8:00CHFDomestic Sight Deposits -420.7bLow
8:00EURECB's Nowotny on Austrian Economic Outlook --Medium
8:00EURECB VP Constancio Speaks in Frankfurt --Medium
8:10EURMarkit Germany Retail PMI (MAY)-51.0Low
8:10EURMarkit Eurozone Retail PMI (MAY)-47.9Low
8:10EURMarkit France Retail PMI (MAY)-48.2Low
8:10EURMarkit Italy Retail PMI (MAY)-42.6Low
8:30EUREurozone Sentix Investor Confidence (JUN)7.06.2Low

Critical Levels

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

--- Written by Ilya Spivak, Currency Strategist for

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