Afternoon analysis 06.06.2016:
Surveys in the United Kingdom are beginning to show the advantage for the Brexit supporters. Lockhart on the monetary policy in his interview with Bloomberg. The zloty is slightly stronger in the afternoon, due to a relatively positive sentiment in the emerging markets.
Brexit is becoming more frightening
The Brexit supporters are gathering new points since the moment when ICM published the survey that showed the advantage for them in online surveys, as well as in phone surveys. Only one out of four recent surveys (two by YouGov, one by ICM and one by Opinium) showed the advantage for the EU supporters.
Moreover, it is worth noticing that the latest ICM survey show a 5% advantage for the Brexit supporters. This is their best result since announcing the referendum.
The average from six recent surveys published at whatukthinks.org website, shows a 2% advantage for the Brexit supporters (51% against 49%). The pound wore-off approximately 3.5% against the euro in one week. Significant moves are observed on the zloty as well. Last week, the GBP/PLN was testing the area of 5.80, while it is currently at the level of 5.55. Thus, the changes are quite significant.
Even though there were many moments that the risk of Brexit either decreased or increased, the scenario of the UK leaving the EU is becoming more realistic with each day until the referendum.
On the other hand, we need to take note that online surveys differ significantly from phone surveys (except for the above mentioned ICM study). If the forthcoming days bring approximately 10% advantage for the EU supporters, the situation may calm down for a while. However, nervousness will return shortly before the referendum.
However, if phone surveys confirm the recent trend, the Brexit anxieties would increase significantly. Therefore, strong evaluation of the pound could last until the referendum.
Lockhart on interest rates. Zloty is slightly stronger
Dennis Lockhart presented his opinion regarding the monetary policy in the interview with Bloomberg television. This was a few hours before Janet Yellen's testimony in Philadelphia. Even though the FOMC representative from Atlanta does not have the right to vote this year, he is considered close to the Fed's consensus.
In Lockhart's opinion, patience regarding Friday's data from the Labor Department, as well as Brexit is justified. This means that he supports leaving interest rates unchanged in June. However, Lockhart still claims that there should be two hikes this year.
A similar approach can be expected from Janet Yellen. She will probably sustain perspective of the monetary tightening in forthcoming months, although she will make it contingent upon the return of the data to the trend. It is possible that she will support the theory that the recent data was a one-time disturbance. This may help the dollar.
Today's session is favorable for the emerging markets. The zloty is a beneficiary of this move as well. It even gains slightly against the forint. This means that the PLN is working-off some of the losses from previous weeks. The situation should not change much within the coming hours. The euro will probably remain 0.02-0.03 PLN above the 4.40 level.
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