GBP remains under pressure ahead of the key EU referendum, with losses against most of the major currencies in recent weeks. This has been particularly apparent on GBP/CAD, with an almost 10 cent drop occurring over the past month. Sterling has found any sustainable improvement hard to come by, with so much uncertainty surrounding a possible Brexit handicapping the Pound. Add to this a steady rise in oil prices over the aforementioned period and it is easier to understand why we have seen such an aggressive drop on the pair.
Whatever the result of the referendum the markets will have to factor in future policies and possible pitfalls and with so much uncertainty attached to the UK leaving the EU, this result is likely to cause extreme volatility and panic for investors. Whilst Sterling would likely take an immediate hit, the knock on effect should also be considered. The markets would have to re-evaluate their entire blueprint, and start to consider a scenario they will not ever really have considered or planned for. The current set up is far from perfect but investors are viewing it as better the devil you know and I have no doubt the Pound will struggle to gain any sustainable support for many months to come.
Looking outside of the referendum and we still have economic data which needs to be considered. It was interesting to note that the Pound gained little support this week, despite better than expected Manufacturing & Production figures. We also had the latest NIESR UK Gross Domestic Product (GDP) estimate, which predicted a slight improvement on previous of 0.5% growth. Despite these showing g a more positive outlook for the UK, they did little to boost the Pound, which continues to find life tough going ahead of the most important vote this countries seen for 50 years on June 23rd. Looking to Canada and tomorrows official unemployment rate is likely to dominate investor focus. If the reading comes outside of the expected 7.1%, then expect additional volatility on GBP/CAD exchange rates.
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