Sterling opens the week sharply lower as Brexit fears intensify ahead of the EU referendum on June 23. A YouGov poll showed that 45% support "leave" while only 41% support "remain". Another TNS poll showed 43% support "leave" and 41% support "remain". Prime minister David Cameron warned that "nearly all experts agree there will instant shocks to the economy if we leave the EU and there is a clear and present danger of higher mortgage rates" but its clear that people were not listening. The pound remains the weakest major currency entering into June and its weakness even overwhelmed the post NFP greenback. Technically, EUR/GBP is heading back to 0.7946 resistance for the moment and would likely target a take on 0.8116 high next. GBP/JPY's break of 153.64 minor support today adds to the case that larger down trend is resuming for a new low below 151.64. GBP/USD is having an eye on 1.4331 support today.
Dollar stays the second weakest major currency this month after last week's non-farm payroll report eliminated chance of a June hike. While markets also aggressively reduced pricing of a July hike, it's far from being certain yet. The above mentioned Brexit referendum is a key factor for Fed. And there will be another set of June employment data before FOMC meets again in July. But for now, the greenback will likely stay soft. Cleveland Fed president Loretta Mester said after NFP that inflation is moving towards target, growth is picking and it's near full employment. She maintained that "a gradual upward pace of the funds rate is appropriate." Fed Governor "Lael Brainard" said that NFP was "sobering and suggests that the labor market has slowed" and "prudent risk-management implies we should wait for additional data to provide confidence that domestic activity has rebounded."
On the data front, Australia TD securities dropped -0.2% mom in May. Eurozone data is the main focus today. German will release factory orders. Eurozone will release retail PMI and Sentix investor confidence. US will release labor market conditions index. RBA and RBNZ rate decisions will be the main focus this week. While RBA is expected to stand pat, RBNZ is expected to cut the OCR again by another 25bps to 2.00%. Here are some highlights for the week ahead:
- Tuesday: RBA rate decision; Japan leading indicators; German industrial production; Swiss foreign currency reserves; Eurozone GDP revision; US non-farm productivity; Canada Ivey PMI
- Wednesday: Japan GDP final; Australia home loans; Swiss CPI; UK productions; Canada housing starts
- Thursday: RBNZ rate decision; UK RICS house price balance; China CPI; Swiss unemployment; German trade balance; UK trade balance; Canada NHPI; US jobless claims
- Friday: Japan Tertiary industry index; German CPI final; Canada employment; US U of Michigan confidence