Sterling underperformed despite UK manufacturing PMI coming in better-than-expected. However, this upbeat data was overshadowed by Brexit concerns after the latest poll showed a shift towards voting to leave the European Union in the June 23 referendum.
Two Guardian/ICM polls showed that the “Leave” camp had a 52-48 lead against the “Remain” camp. This was a shift from polls last week that indicated those favouring to stay in the EU were in the lead.
The news led to a selloff in sterling, which slipped to a 2-week low of $1.4405 against the dollar today. EURGBP rose to 0.7755, the highest since May 18.
The upbeat manufacturing PMI data did little for the pound. The PMI index for May surprised to the upside, coming in at 50.1 versus 49.6 expected and higher from the upwardly revised 49.4 in April.
Sterling will likely remain vulnerable to Brexit polls and headlines as the June 23 referendum approaches.
PMI data were also out of the Eurozone today. The final May manufacturing PMI for the whole of the region (the aggregate number) came in at 51.5 as expected and unchanged from a preliminary estimate. However the May number was down from April’s 51.7.
The lack of surprises in the Eurozone PMI data today and a broadly weaker dollar helped lift the euro to a high of $1.1185. Prices stalled at this level before pulling back. The main risk event for the single currency will be Thursday’s European Central Bank meeting. While the actual monetary policy announcement is not expected to reveal any change in policy, what will likely impact the euro will be ECB President Mario Draghi’s press conference as investors will look for clues regarding the Bank’s rate path.
The yen was stronger today as the currency drew demand for its relative safety in a risk averse market environment today, brought on by Brexit concerns.
USDJPY fell to a 2-week low of 109.04 yen. The dollar’s decline was paused after data showed the US manufacturing sector expanded for the third straight month. The ISM manufacturing index jumped to 51.3 in May from 50.8 in April, beating economists’ forecasts for a reading of 50.3.
The main risk event for the dollar now will be US jobs data, with the ADP private payrolls due on Thursday and the all-important nonfarm payrolls out on Friday. The Fed will be closely watching US economic data ahead its policy meeting on June 14-15. Fed Chair Janet Yellen indicated last Friday that if the incoming data are good, it would be appropriate to raise interest rates even as soon as this month.
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