Sterling did not lose its upside momentum from the Asian session and continued its advance in European trading to hit a fresh six-month high of $1.4945, beating the prior session’s high of $1.4843 before easing back to the $1.47 handle.
The market appears to be anticipating a “remain” result from the referendum on the UK’s membership in the EU that is underway today. Risk appetite was boosted by polls showing Remain in the lead. An Ipsos Moris poll published today showed a slight lead for Remain supporters at 49% versus the Leave camp’s 46%.
The euro was given a lift to a six-week high of $1.1420 before easing slightly. Demand for the single currency was likely boosted by expectations that the UK would remain in the EU, which would in turn benefit the EU overall since the UK is an important member and has one of the strongest economies within the bloc.
Eurozone PMI data were mostly ignored today as the main market focus was on the UK and the referendum. The flash composite PMI numbers which includes both the manufacturing and services sectors fell to 52.8 from 53.1 in May. A figure of 53.0 was expected.
The safe haven yen was a notable underperformer and suffered losses due to risk appetite in the markets today.
The dollar surged to briefly test the 106 yen level before steadying around 105.80 yen. The pair had started the European session from the mid-104 yen area. The pound also rallied against the yen to reach a three-week high of 158.08 yen.
Riskier and commodity linked currencies moved higher on upbeat sentiment. Oil prices also rose and added support to the Canadian dollar.
The aussie rallied to a fresh two month high during the European session, hitting $0.7596. USDCAD fell to a two-week low of $1.2677. Brent crude rose back above $50 while US oil rose close to $50 a barrel.
The Norwegian crown, an oil – sensitive currency, gained due to higher oil prices as well but also due to the Bank of Norway announcing that it left interest rates unchanged at 0.50% as forecast. USDNOK fell to a two-week low of 8.1448.
Data out of the US today showed initial jobless claims fell to 259,000 last week versus 270,000 expected. This was much lower than the prior week’s 277,000 claims. Other US data showed Markit’s manufacturing PMI bounced back in June. The flash figure came in at 51.4 from 50.7 in May and beat expectations for a reading of 50.8. New home sales in the US tumbled in May by 6% to a seasonally adjusted rate of 551,000 from April’s downwardly revised 586,000.
The dollar showed little reaction to the US data as most currency moves were not driven by fundamentals today but by sentiment as focus was on the EU referendum in the UK. Polls close at 9pm GMT.
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