© Dukascopy Bank SA
The GBP/USD had been falling sharply for some time since the Bank of England issued a fresh warning that uncertainty about the EU referendum this week threats knocking Britain's economic growth. The officials again reiterated that Brexit could lead to inflation, which would increase largely on the back of a dramatic deprecation of the British currency, while the economic growth and labour market would suffer a blow from falling investments. BoE officials remained unanimous on the policy stance as an elevated level of volatility continues to undermine the recent macro data. Policy makers kept the benchmark interest rate at its record low of 0.5%. However, the British Pound retreated from the lowest level in more than several years. The pair advanced as much as 2.5% to 1.44 late Friday, up from lows of 1.42 touched on Thursday. This Thursday will be a very important day for the UK and Europe, with most of the volatility likely to be on the GBP pairs and English stocks, as Britons go to vote.
"The financial market will be driven by the EU referendum this week, with expectation of a UK departure from the EU priced in at a very low probability based on the equity markets. Bookmakers have not at any point favored an exit, and while poll numbers have aided media in the creation of dramatic headlines, they serve little purpose. A relief rally in the pair will likely be capped at the psychological 1.5000 handle as dictated by the implied range set out by the options market" Jignesh says. All in all, Community members, that took part in the survey last week, expect the pair to end this week at 1.46, with number of bears (25%) versus bulls (75%).
© Dukascopy Bank SA