Sterling fell below $1.4100 and touched a new 2-month low today from risks of a Brexit as recent polls show support for the UK to leave the European Union. The referendum vote is just nine days away. Meanwhile, the UK’s best selling “Sun” newspaper indicated today that it backs the “leave” campaign.
The pound dipped to $1.4095, the lowest level since April 14 as the latest TNS poll today showed 47% for “leave” versus 40% for “remain”.
The weaker pound and heightened Brexit risk also weighed on the euro, which slipped below the key $1.1200 level to $1.1188. Meanwhile, German 10-year bond yields tumbled below zero for the first time on record.
With the market’s attention on Brexit polling, UK inflation data was mostly shrugged off. The headline inflation number for May held at 0.3% year-on-year despite expectations for it to rise to 0.4%. Consumer prices rose 0.2% month-on-month, less than the 0.3% expected but higher than the prior 0.1%.
Strong retail sales data were published in the US today. Retail sales exceeded expectations, supported by gasoline sales, and grew by 0.5% in May on a month-on-month basis. This followed a 1.3% jump from April and beat the 0.3% expected.
The dollar rose against the yen after the US data to rise back above 106 yen. Earlier in the day the greenback extended lower to touch 105.61 yen, the lowest since May 3, which was a more than three year low.
Aside from concerns about the UK’s EU referendum vote next week, major central bank meetings also weighed on sentiment. Focus now turns to the Federal Reserve which began its June policy meeting today with an interest rate decision and press conference due tomorrow. The Bank of Japan and Bank of England will both make a policy announcement on Thursday.
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