Brexit and US Fed driving the market

Currencies Direct May 20th 2016 - < 1 minute read

This week we have continued to see the dominance of two major themes in the market. Firstly we have the ongoing developments towards the Brexit vote and secondly we have speculation from the US Federal Reserve on the timing for the next rate increase. With no data to focus upon today, the market will continue to look towards these two major themes for direction.
Pound rallied across the board
Over the last week the pound has rallied sharply across the board. The main driver for pound momentum was an Ipsos Mori poll showing the remain camp at 18 points ahead of the leave camp. The poll was a telephone interview which does naturally play in the favour of the remain vote, however the gap looks to be widening which has set the pound alight. It is still early days and a conflicting poll could bring us very quickly back down and we are likely to see two way volatility on developments as we get closer to the vote.
On Wednesday the US Federal Reserve released the minutes from their latest meeting and they were surprisingly hawkish. In addition, yesterday comments from Fed officials continue to drive the view that interest rates are set to increase over the summer in June or July. The news is driving the USD higher, particularly against the euro. The pound is holding up well against the USD due to the Brexit poll, however the US rate hike talk has capped the upward momentum.

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