Daily currency report
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Daily currency report

Sterling

The sterling sell-off continued in Wednesday trading and there’s little light at the end of the tunnel. Six asset managers suspended trading on their property funds citing “exceptional liquidity pressures” as investors panic to exit. This shows a clear lack of confidence in the UK post-Brexit and a housing market which many regard as a safe asset.

Now we look out for manufacturing and industrial production figuresfor May which could indicate a pre-referendum slowdown as data released earlier this week evidenced was the case within the UK’s critical services sector.

Evidence that the pound is suffering across the board can be clearly seen when we look at the GBP: South African rand rate. The pound hit an all-time high against the ZAR this year but has given up a staggering 25 per cent in recent weeks.

US dollar

Minutes of last month’s FOMC meeting show the threat of Brexit was clearly on the minds of Fed officials with the word ‘referendum’ included nine times. Members noted that a post-Brexit world might induce “financial market turbulence that could adversely affect domestic economic performance”, this coupled with poor non-farm payrolls data from May make the probability of a rate hike anytime soon very slim indeed.

Some officials noted that recent low non-farm payroll gains could “be indicative of a broader slowdown in growth of economic activity” – yesterday’s release was keenly watched by markets with a big number expected to be Dollar-positive.

Also this week data revealed that the US trade deficit widened in May by 10.1 per cent – the greatest increase since August 2015. Domestic demand led to increased imports of consumer goods and the strong dollar will continue to be harmful to US exports.

The S&P500 rose 0.5 per cent on Wednesday and is trading at pre-referendum levels as a global risk-off theme begins to develop. The US is showing positive growth levels, low unemployment and inflation at one per cent – investors see US stocks as relatively safe given other concerns.

The dollar is holding on to gains against the pound with the London open expected to remain below $1.30.

Euro

Accounts from the ECB monetary policy meeting last month were released on Thursday, and markets geared up for yesterday’s US employment report. The euro continues to gain versus the pound and is approaching the 86 pence level – the last time this level was sustained was during the first half of 2013.

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