Sterling Volatility Reaches Record-High on 'Brexit' Jitters

Published: 14 Jun at 4 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, Germany,

Pound Sterling (GBP)

The British Pound has seen significant price swings during Tuesday’s European session as traders react to opinion polls and newspaper articles suggesting that the UK will vote to leave the European Union on June 23rd. Sterling implied volatility has reached a record-high with traders so reactionary to divergent opinion polls. Domestic data supported GBP losses today after Inflation stagnated on a yearly basis in May despite predictions of a fractional rise. Traders will be looking ahead to earnings data due for publication tomorrow to see if there is any correlation with today’s inflation results.

Euro (EUR)

Yesterday saw the Euro crash versus its major rivals as the European Central Bank (ECB) stepped up its corporate bond purchases. Traders fear that the ECB’s quantitative easing programme will have a muted impact, however, after yields from German-10 year bonds turned negative for the first time. Bonds from several developed markets are struggling, adding to concerns that ECB policymakers will be forced to loosen monetary policy further in the near-future.

US Dollar (USD)

As traders await the result of Federal Open Market Committee (FOMC) interest rate decision, the US Dollar strengthened versus the majority of its currency rivals. The appreciation was mostly the result of damp market sentiment after ‘Brexit’ volatility saw traders flock to safe-haven assets. Falling commodity prices and global equity market values also supported demand for the US Dollar. In addition, US Advance Retail Sales saw growth better expectations in May. Whilst the FOMC are not expected to alter rates at this time, with ‘Brexit’ uncertainty and domestic political uncertainty dominating focus, there is a chance that the accompanying press conference will reveal clues as to policymaker outlook.

Australian Dollar (AUD)

Damp market sentiment reduced the appeal of the high-yielding Australian Dollar. A drop in May’s Business Confidence also weighed on demand for AUD. Tomorrow is likely to see ‘Aussie’ (AUD) volatility in response to Westpac’s Consumer Confidence Index. However, market sentiment and US Dollar strength are likely to overshadow domestic data results.

New Zealand Dollar (NZD)

Much like its Oceanic counterpart, the New Zealand Dollar struggled against damp market sentiment and US Dollar strength. Tonight’s REINZ House Sales data has potential to cause ‘Kiwi’ (NZD) volatility. However, traders will be looking ahead to tomorrow’s Global Dairy Auction. If whole milk powder prices are seen to fall again, the New Zealand Dollar is likely to tumble versus its major peers.

Canadian Dollar (CAD)

Despite falling crude oil prices and damp market sentiment, the Canadian Dollar strengthened versus a number of its major peers today. This is partly in response to consolidation trading, but also amid confidence that the Federal Reserve will avoid altering monetary policy outlook tomorrow. Existing Home Sales data may cause ‘Loonie’ (CAD) volatility tomorrow, but market sentiment and the outcome from the FOMC press conference will be far more likely to cause CAD movement.

As of Tuesday, 14th June 2016, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.2587, GBP USD exchange rate was 1.411, GBP AUD exchange rate was 1.9197, GBP NZD exchange rate was 2.0199, and GBP CAD exchange rate was 1.8155.

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