GBP falls on latest phone poll showing nearly half want to leave EU; choppy USD trading; NZD and AUD climb higher

By Kymberly Martin

The NZD/USD has been the strongest performing major currency over the past 24-hours, trading near 0.6760 at present. The GBP has been the worst performer.

Markets kicked back into action after public holidays in the UK and the US on Monday. Equities experienced modest down days on either side of the Atlantic, whilst the performance of commodities was mixed.

While the WTI oil price initially pushed higher overnight, it now sits below the level it traded at yesterday morning. In some choppy trading the USD index has traded a little higher.

The GBP dropped early this morning as it appears that momentum is moving in favour of the ‘leave’ camp for the upcoming referendum on EU membership. An ICM phone poll showed 45% supported ‘leave’, 42% favoured ‘remain’ whilst 13% were undecided. The GBP/USD dropped from around 1.4650 to trade at 1.4480 currently. The EUR/USD also suffered some contagion. From above 1.1170 it now trades at 1.1140.

The AUD/USD gapped higher yesterday afternoon after the release of Q1 net exports that were much stronger than expected. This raised upside risk to today’s AU Q1 GDP release. Our NAB colleagues expectations are now for a 3.0%y/y outcome, above the consensus pick of 2.8%. If delivered, this should provide a further boost to the AUD/USD today. The AUD/USD found resistance at its 200-day moving average, circa 0.7260, overnight. It now sits at 0.7230.

This afternoon’s release of China PMI data will likely also have some influence on the AUD (and the NZD). Consensus expectations are for a marginal slip in the manufacturing PMIs. But it is anticipated the official measure will remain at 50 (the level that demarcates expansion from contraction). A slip below this level would likely weigh on market sentiment and local currencies.

NZ data delivery was not a big driver of the NZD/USD yesterday. The ANZ business survey was not materially changed from its previous reading. However, the NZD/USD has stepped steadily higher since yesterday morning, trading at 0.6760 at present. There is potential for it to be influenced by the latest GDT dairy auction that takes place in the early hours of tomorrow morning. We would be more surprised to see a big drop than a modest tick-up in average prices.

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