The pound jumped sharply on Thursday, bouncing back from an aggressive slide towards multi-month lows against the US dollar as campaigning on the EU referendum was suspended.
Campaigning was suspended and Thursday night’s Mansion House speeches altered after the Labour Party’s Jo Cox was murdered. She is the first sitting MP to be killed since 1990.
Given Cox’s EU ‘Remain’ vote stance, it is believed by some in the market that her murder (if proved to be politically motivated) could influence an increase in support for a ‘Remain’ vote on June 23.
US dollar
Since falling close to a two-month low around the $1.40 mark yesterday, the GBP/USD rate has rallied by over two per cent and 2.8 cents as sharp currency moves continue to be driven by Brexit news flow.
Before Thursday’s jump in GBP/USD, Cable had fallen aggressively since last week’s highs around $1.45 after the odds of a Brexit had flared on pro-‘Leave’ opinion polls.
Bloomberg’s polls analytics now put a potential UK exit at around 42 per cent – up sharply from around 22 per cent at the start of the month. Ladbrokes have reduced their Brexit odds to 36 per cent after EU campaigning in the UK was suspended.
Japanese yen
Markets are on intervention alert with Japan’s Finance Minister Taro Aso calling an emergency meeting overnight with the Bank of Japan to discuss the surge in the yen this week.
Aso has again called the yen’s moves disorderly and one-sided. However, bets of Japanese intervention, which could roil FX markets, remain low. At recent G7 meetings, the US and Japan disagreed over what a ‘disorderly’ FX move is.
On Thursday, the GBP/JPY hit 145 and its lowest rate in three years. The fall to 145 marked a 10.49 per cent fall in the GBP/JPY rate since June 1.
Euro
The euro is stabilising after falling to June lows just above $1.11 against the US dollar. The move lower in the euro came from Brexit-driven safe haven flows into the US dollar, and came despite Wednesday night’s dovish interest rate guidance.
$1.1226 is the 100-day moving average in EUR/USD and could prove to be a key support/resistance level in the short-term.
Against the pound, risk mitigation took the GBP/EUR rate to a two-month low around €1.25. The 100-day moving average which has tended to indicate ‘short-term value’ was around €1.2780 yesterday.