It’s now been one week since the historic decision by UK voters to leave the European Union. Overall, the pound is over 10% lower than it was when polls closed on June 23. Sterling took another hit after Bank of England Governor Mark Carney warned that the central bank may have to loosen monetary policy over the sumer to support the economy. Carney’s statements show a pessimistic outlook for the UK economy, but his plan to support growth via rate cuts should help bolster inflation and exports as the pound weakens.
The euro is seeing some gains this morning after a report that Eurozone manufacturing grew faster than initially thought and reached its best performance this year. The euro also gained against the dollar because of a separate report that unemployment in the European Union fell to its lowest in almost five years. While the news is positive, the euro’s gains have been limited as the data was collected pre-Brexit. It’s likely that the referendum will have a negative effect on businesses and consumer spending in the short-term.
Global equities are surging going into the weekend as expectations for central bank easing rise. European stocks are also extending their post-Brexit recovery for the fourth day. At the same time, markets are continuing to show some risk aversion, driving up gold.
EURUSD: Euro sees modest gains after the release of positive manufacturing and employment data collected pre-Brexit.
GBPUSD: Sterling falls as Carney predicts rate cuts.
AUDUSD: Aussie dollar gains against USD, due to current market climate assisting commodities and diminishing chances of a rate cut from RBA.
USDCAD: Canadian loonie strengthens going into the weekend as a result of higher crude prices.