Pound drops amid Brexit fears

Monday, February 22, 2016

The pound sterling traded back towards a three week low against the dollar as Brexit fears saw investors pull out of the currency. The pound managed to end last week on an upbeat note against the dollar, rising to 1.4409 however, activity early this morning has seen a dramatic reversal of fortunes and has prompted a reversal in fortune for sterling which is currently trading 1.4% lower than Friday’s close, towards 1.4200. The PM is passionately campaigning to keep the UK in the EU but with Tory opposition growing we expect additional volatility in the currency as investors struggle with decision. London mayor, Boris Johnson has been the latest high profile figure to back the Out campaign and with a number of senior cabinet ministers vocally backing a Brexit we expect the pound to come under further pressure, with acute losses against the dollar and euro.

Japanese PMI data released in the early hours of the morning saw manufacturing activity slow sharply in February as the preliminary reading for the Nikkei manufacturing PMI reading came in at 50.2, dangerously close to the 50.0 point level that divides expansion from contraction. Manufacturing activity in January had shown some signs of slowing as the sector posted a 52.3 reading, slightly below December’s 52.6 figure. Currency volatility likely contributed to the slowdown as a stronger yen put substantial pressure on exports while weaker household spending only compounding worries.

Despite the less than impressive Japanese PMI data, Asian equity market started the week on the front foot as the appointment of Liu Shiyu as the new chairman of the China Securities Regulatory Commission was seen as a positive move by officials in Beijing. His predecessor Mr Xiao Gang had been criticised heavily for his handling of the recent market slump and the failure of the circuit breakers to settle markets. The base metals complex posted encouraging gains overnight and so far looks to be holding onto the recent bullish moves. Three month copper prices have rallied 1.6% so far after finding firm support around Friday’s close but we continue to exercise caution over the coming sessions owing to the impulsiveness of this rally.

GBP under pressure on Brexit concerns 

GBP Curncy British Pound Spot 2016 02 22 08 00 47

Japanese manufacturing PMI drops in February

MPMIJPMA Index Nikkei Japan Man 2016 02 22 07 55 22

3-M copper post a strong start to the week

LMCADS03 Comdty LME COPPER 3 2016 02 22 08 02 13

Events for today

0200

JP

Feb

Nikkei Japan PMI

0830

EZ

Feb

PMI Manufacturing

0900

EZ

Feb

PMI Services

1330

US

Dec

Chicago Fed Nat. Activity

1445

US

Feb

PMI Manufacturing

Topics: Copper, Base Metals, PMI, LME, GBP
More from: Kash Kamal