Sterling was one of the worst performing major currencies, along with the euro in today’s European Session. In commodities, oil rose while gold prices fell.
The pound was definitely the main focus today after it reacted negatively to news over the weekend with regards to the UK’s referendum on whether to leave or stay in the EU.
Sterling fell below its lowest level against the dollar since March 2009, just below $1.41 at one point. It reversed all of Friday’s gains to $1.44 that followed on news of Prime Minister David Cameron’s deal with the rest of the EU with regards to Britain’s membership terms. But London Mayor Boris Johnson’s announcement on Sunday that he is backing the campaign to leave the EU has boosted concerns of a Brexit. It is believed that if the UK leaves the EU, this would have a negative effect on the UK economy at least initially, so this concern is likely to weigh on the pound. The British currency is expected to be highly sensitive to opinion polls until the referendum day on June 23.
Economic data out of the UK was mostly ignored today. The CBI’s Industrial Trends orders numbers fell to -17 in February, more than the expected -11.
Another major mover today was the euro, which slid to an almost three-year low against the yen. The euro fell below 125 yen to the lowest since March 2013.
Against the broadly stronger dollar, the euro slipped to a more than two-week low to touch the key $1.10 level.
Not helping the euro was Eurozone PMI data. The flash reading of the Markit composite PMI fell to 52.7 in February from 53.6 the prior month, far below expectations of 53.3. The figure extends the weak start to the year, with output slowing for a second straight month. This increases the chance of the ECB easing policy at its next meeting in March.
The dollar rose back above the 113 yen level in the European session. The pair eased lower after disappointing US manufacturing PMI data for February. The flash reading fell to a low not seen since 2009 at 51.0. It was forecast to come in at 52.0 following January’s 52.4 reading. The weak data raise concerns about the health of the US manufacturing sector.
Oil prices rose above $33 today, influencing the oil-linked Canadian dollar. Consequently, the USD/CAD pair was pushed below $1.37.
Gold approached the $1200 level as the dollar was broadly stronger today. The two assets tend to have an inverse price relationship.
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