Daily Market Report 16/06/16

GBP

A number of key pieces of data were released yesterday for the Pound with all beating forecasts. Most notably was the unemployment rate which fell to its lowest level since October 2005, dropping from 5.1% to 5.0%. Elsewhere earnings excluding bonuses rose by 2.3% in which the Office for National Statistics stated was partly due to the introduction of the new compulsory national living wage. Chris Williamson Chief Economist at Markit argued, “More recent survey data suggest that employers demand for staff has cooled in more recent months amid worries about Brexit and a slowing economy, suggesting the good news should be treated with caution.”

Opinion poll ComRes which is used by the Sun newspaper gave the remain camp a 1 point lead going into the final week of campaigning, which helped sterling rally throughout the day before tailing off as London closed for business. An analyst noted that, “Investors probably have already built up quite substantial hedges to protect against the risks of a Brexit outcome; it would take another big shock from the polls in favour of a leave vote to push investors.” 

USD

As expected the US kept interest rates unchanged last night following a poor jobs figure at the start of the month. The Federal Reserve signalled it still planned two hikes this year, although six of the Fed’s 17 individual forecasts from governors and regional Fed presidents projected just one hike this year.

Janet Yellen gave no clues as to when the next rate hike would take place but markets have all but priced out any rate rise in 2016. The central bank also lowered its economic growth forecasts for 2016 to 2.0% growth from 2.2% and the outlook for 2017 to 2.0%.  

Fed Chair Yellen also gave the Fed’s view on the upcoming referendum in the UK, stating, “It is a decision that could have consequences for economic and financial conditions in global financial markets, if it does so it could have consequences in turn for the US economic outlook that would be a factor in deciding on the appropriate path of policy.” 

Key Announcements

09.30- GBP: Retail Sales MoM expected to fall to 0.3% from 1.3%

12.00- GBP: MPC Official Bank Rate Vote expected to remain unchanged at 0.5%

12.00- GBP: BoE Monetary Policy Statement

12.00- GBP: Official Bank Rate expected remain at 9-0 in favour of no change

13.30- USD: US Inflation (CPI) MoM expected to fall to 0.3% from 0.4%

13.30- USD: US Initial Jobless claims expected to rise from 264K to 267K