The US Dollar Index has grinded lower over recent sessions, as British voters decide whether or not to stay in the EU.
Currency traders have been bracing for the possibility of a British exit for months, and the vote is almost upon us. The currency markets have priced-in most scenarios, so the vote may have a limited impact on trading. The only scenario which could trigger extreme volatility would be a decisive victory for those wanting to stay.
Fundamentals
The US Dollar has had a bearish bias in recent weeks, fueled by speculation that the Fed will only raise rates once before the end of the year. There are fewer Fed officials expecting two rate hikes by year?s end, which is what the Central Bank is suggesting will happen. Economic growth in the US has been extremely lackluster, which has failed to instill confidence in the economy. German manufacturing saw an uptick in June. The German manufacturing Purchasing Managers? Index (PMI) rose to 54.4 in June from 52.1 last month. The services PMI saw a decline to 53.2 from 55.2 in May. Germany, however, is the long bright spot in the EU. France?s manufacturing PMI declined to 47.9 in June, versus 48.4 in May, while the country?s services PMI regressed to 49.9 from 51.6 in May. The composite EU PMI, which includes both manufacturing and services, fell to 52.8 in June, versus 53.1 in May. A vote to stay in the EU could result in some selling pressure in the US Dollar, as this would keep the status quo and not rock the boat. Late polls, conducted yesterday, suggest the Remain camp will prevail. The YouGov poll for The Times (London) showed that 51% of voters supported the campaign to remain in the EU, with 49% supporting Brexit. The ComRes poll for the Daily Mail newspaper and ITV television showed the Remain campaign had a 48% to 42% lead over the Leave camp.
Technical Notes
