Poor data from the UK sent the pound sharply down

The US dollar rose against most of the major currencies, with its biggest gain against the British pound. In fact, the weakness of the pounds was ubiquitous, following worse than expected economic data coming from the country.
The pound fell by nearly 1% against the dollar to 1.4110 after disappointing economic data.
Inflation in the UK slowed down more than expected in March to 1.25% in the month, from 2.7% in February. This has led investors to think that we will hardly see a recent rise in interest rates on the part of the British Central Bank.
Also, the results have prompted a number of experts to expect a slowdown in economic activity in the country that is soon expected to come out of the EU.
Late yesterday, the British pound traded at $1.4377, a new peak after the referendum. Even though, despite its decline today, the British pound is still trading substantially up against the US dollar in the last 12 months. More precisely - 11% up.

Weak property growth in the UK

Property prices in the UK maintain their weak growth in October this year. Compared to the same month last year, properties rose by 2.5%. The range of raise is similar to that of the beginning of the year.
The rise in property prices in the UK has slowed down significantly over the past year as a result of the uncertainty associated with BREXIT.
Property grew by 0.2% on a monthly basis, which was a serious slowdown compared to the first half of the year.
Low interest rates and steady levels of employment give some relief to the demand for real estate.
On the other hand, the uncertainty associated with BREXIT and the conditions for leaving the Union can be factors that aggravate the situation for the property market.
The decision of the central bank this week to raise interest rates may have a further negative impact on the properties.
Property buyers and mortgage lenders are already adjusting their finances in a line that fits the interest rate hike.

Earlier UK elections put FTSE 100 under pressure

Investors have remained in a standstill against the backdrop of Britain's upcoming parliamentary elections and the upcoming presidential vote in France.
The FTSE 100 wiped out its growth from the beginning of the year, closing at 7,114.36 on Wednesday, losing even more -0.46% of its value, and the International Monetary Fund warned that the unpredictable Brexit result puts risks to global financial stability at a time, in which it is already facing challenges from heavily indebted US corporations, the credit bubble in China and the weak European banks.

The dispute over Gibraltar

Britain officially started the procedure for withdrawing from the EU last week, when the country applied for divorce to the European Council. Gibraltar is its overseas territory and is located between Spain and Africa. Theoretically, after Brexit, the territory should stay in the EU. Earlier, the former leader of the Conservatives, the head of the Republican Party of Great Britain, Michael Howard, expressed the opinion that the current Prime Minister Teresa May may start a war to defend Gibraltar, as Margaret Thatcher did towards the Falkland Islands claimed by Argentina in the early 80s. Theresa May herself said she would never agree with the decision on the disputed territory, in which the rights of the inhabitants of the territory would be violated.
Consultations on the ownership of Gibraltar are currently underway between the UK, the EU and Spain. This week on Friday, the speech of the head of the Bank of England Mark Carney, which may affect the rate of the pound, is expected. On the same day there will be important British macroeconomic statistics: the balance of foreign trade for February, as well as industrial production and the volume of construction.

The pound went up against the backdrop of rising activity in the services sector of Great Britain

On Wednesday, the pound rate rose to a maximum for the session after the report data recorded in March the maximum growth in the service sector of the UK for the three months of 2017.
At 08:50 GMT, the pair EUR/USD increased by 0.27% to 1.2473 from the previous value of 1.2435.
Markit reported that the index of business activity in the service sector (PMI) of Great Britain increased last month to 55.0 compared to 53.3 in February. This is the maximum after December 2016.
Economists predicted that the value of this index would be 53.5.
The report says that the rate of price increase has become the maximum for eight and a half years, which indicates a possible increase in inflation this year above 3%, as many economists predict.
The report also indicates that the growth rate of new jobs in the services sector has become minimal over the past seven months.
Together with data from similar studies on the manufacturing and construction sectors that were published this week, the latest report indicated the likelihood of a slowdown in economic growth as the consequences of the UK's withdrawal from the EU.

Inflation in the UK passed the limit of 2%

For the first time in three years, consumer prices in the UK recorded a growth of 2.3% yoy, as expectations were for 2.1%. Bank of England repeatedly hinted its willingness to tolerate exceeding goal inflation is limited.

On Tuesday the pound recorded strong growth, while GBP/USD rose by 114 pips, closing at 1.2471. The British pound was also supported with the exact date of activation of Art. 50 of the Treaty of Lisbon.

The euro continued to gain against the greenback and the EUR/USD rose to 1.0806 dollars per euro.

The dollar was subject to sales also against the Japanese yen, as USD/JPY fell over 70 pips, closing at 111,777 yen per dollar. According to Japanese analysts pressure on the greenback was due to falling yields on US bonds.
   
On Tuesday, gold rose by 0.85% at the beginning of the Asian session, the precious metal was subject to sales and reached 1226.91, but subsequently rose and closed at 1244.38 dollars per ounce. The gold price is sensitive to interest rate increases, but rate hikes are not expected in the near future, which explains the bullish sentiment of investors and analysts. Since the increase in interest rates last Wednesday, gold has increased by over 45 dollars per ounce.

British economy retains upward momentum (Part 2)

Inflationary pressure is strong in the industrial sector, where manufacturers are suffering from rising raw material costs, according to BCC price pressures is now the highest since the second quarter of 1997 onwards.

According to the survey, inflation has emerged as the biggest cause of concern for many companies. Companies from both industrial and the services sectors are under pressure mainly by rising raw material costs, which increases opportunity for profit and could weaken further investment.

Firms in the country have become slightly more optimistic about their prospects compared to the previous quarter, although their confidence in turnover and profits remained relatively low compared with levels in the last three years.

The latest quarterly survey by the British Chamber of Commerce covers more than 7,200 companies in the country and was conducted between November 7 and November 28, 2016.

British economy retains upward momentum (Part 1)

The British economy has maintained its upward momentum in the last months of 2016, but at the same time, inflationary pressure has increased with the robust pace of almost 20 years. This shows a survey of British Chamber of Commerce (BCC), released today and cited by Reuters.
British Chamber of Commerce said that sales and hiring improved slightly in the fourth quarter, which is another signal that Britain is likely outstripped growth in most of the developed economics past year. The latest quarterly survey, however, also indicates the presence of complications arising from the votes of the British referendum last June when Britons voted to leave the European Union.
According to BCC, a record number of manufacturers expecting price rises over the next three months. Most companies in the service plan to raise prices, and their number is the highest since the beginning of 2011 onwards.

Although British business reported a slight improvement in export sales in the fourth quarter, the Chamber of Commerce notes that there is still very little evidence that the weakness of the pound has provoked a boom in demand for British goods abroad.

The Bank of England has called the fall of the pound "significant" will take into account in policy

The head of the British central bank Governor Mark Carney said that the fall in the value of sterling has appeared "quite significant" and the responsible for interest rate policy officials will consider it.
Speaking on Tuesday before lawmakers, Carney reiterated that the Bank of England is not aimed at a particular level of the pound, but is not indifferent to the exchange rate of the national currency.
Carney believes that the recent weakening of the pound after the annual conference of the ruling Conservative Party in October was not due to a change of opinion about the likely actions of the Bank of England's interest rate.
In early October, the pound fell to a minimum of 30 years.
Investors felt that the new British prime minister Theresa May will choose a hard-line approach to the forthcoming negotiations with the European Union about the Brexit, and this can greatly complicate access to European markets of London. May promises to begin formal negotiations on Brexit by March next year.
According to Carney, the pound starts to really vary, as time frame for lauching the 50th article is clarified, the pound is also sensitive from market perception - what will be the potential relationship between the United Kingdom and Europe.

The Bank of England brang the pound to life

On Thursday, on the foreign exchange market in the spotlight is the British pound. Today, after at their meeting, the Bank of England lowered the interest rate from 0.5% to 0.25%. This is the lowest value of the index over the past 320 years. Also, the central bank increased its asset purchase from 375 billion pounds to 435 billion pounds.
The bank's actions were expected. Mark Carney in his speeches after Brexit warned currency market players that the regulator will carry ultrasoft policy and it is likely to decrease the rate.
This decision was dictated by a desire to support the UK economy, improve goods turnover and increase the volume of industrial production. Not the least role in the decision of the Bank of England played the results of the referendum on exit of the UK from the EU structure. After the UK will be out of the EU, its economy may experience a certain drawdown, but this aspect should be soften.
The pair GBP/USD in the coming days will aim for 1,289, thus, the pound's downward trend will be confirmed in both medium and long term.

In search for security assets

Global investors are now actively search for security assets, which is reflected in government bond yields and prices of "quasi" security assets. For example, Swiss government bonds are traded at a negative rate, the yield on the 50 years is approximately -0.05%. Similar trends are observed in countries with ultrasoft monetary policies.
The most interesting situation occurs in the UK property market. Brexit provoked major withdrawals of real estate funds, forcing them to stop trading shares of funds, due to the lack of liquidity in the real estate market and the inability to implement the withdrawal of assets. What of course will continue to negatively affect the prices both commercial and private real estate due to rising uncertainty around the UK.
This, by the way, is only one of many possible consequences of Britain's exit from the EU. Even taking into account the fact, that the actual impact on the economy will not be as sharp as many fear, the feeling of uncertainty will cause investors to diversify risks, including in the portfolio emerging markets with different from the developed countries type of risk.

The rating agencies have questioned the sustainability of the United Europe's ideas

International rating agency Standard & Poor's downgraded the credit rating of the European Union from AA+ to AA after the British decision to exit the EU. At the same time, short-term rating was affirmed at A-1+, with a stable outlook on all ratings.
Analysts of the agency explained that after the referendum in Britain on June 23, they revised their conclusions about the economic impact of the general growth of disunity in the EU countries. Now the rating upgrade is possible only by increasing the average overall rating of the bloc's members or by strengthening its political unity, not only on the basis of ratings of such anchor countries such as Germany and France. The downgrade is also possible with a decrease in average total GDP of the EU members or with  a lack of support from their side in the most important areas of Brussels politics.

Bulls Triumph

The week after Brexit finished with the triumph of "bulls". Almost all asset classes are now trading above the levels prior to the referendum and the likely demand for risk will remain high and the next week. The reason for the growth in buying activity - the central banks, that have announced supporting programs, which in fact means the conservation of ultrasoft monetary policies of leading central banks for a long time.
Even from the Fed, investors no longer expect a rate hike this year. According to Bloomberg consensus, the likelihood that the Fed will raise the rate on one of the next meetings is close to zero. Conversely, the likelihood, that the controller can reduce the rate is increased. As a result, we are seeing demand for dollar assets: yields on US long-term treasuries updated their historical lows, the S&P500 is trading close to its highs.

Bank of England may "soften" in August

"Brexit" made adjustments not only in the behavior of the world markets, but also in the course of monetary policy of key central banks. So, now there are few left, who believe, that the Fed will increase rates later this year. More then that - it's began to talk, that the US regulator perhaps even "gives back up" and would lower the rates.
However, the exit of Britain, of course, concerns the Bank of England in a first place. Mark Carney has already begun to prepare the markets, that during the summer period, the regulator can go to "some" easing of monetary policy. To the next meeting remain exactly two weeks. Most likely, in July, the regulator will pave the way for launching additional incentives at the next meeting. During this time, the authorities will try to assess the potential damage from "Brexit" and to identify the extent of mitigation.
For the UK economy this "divorce" definitely will not pass unnoticed. One of the most painful losses could be massive reduction of investments in the country, which are very needed. This will be particularly noticeable for electric power industry, which requires modernization and, consequently, the participation of investors. This threat is quite real, because now a number of companies indicates the reluctance to engage in new projects or intentions to cut investments in the existing ones.
Investment factor served as one of the reasons that all three major rating agencies downgraded the UK together with a negative forecast. Probably, in such circumstances, the Bank of England will have no choice - the economy will need a support from the regulator.
In the light of these prospects, which at this stage look not rosy, in long term the pound is likely to remain under pressure. Therefore, market participants may choose to sell GBP/USD on growth. Now quotes remain under pressure, not being able to test the 1.33 mark, not to mention the closure of the gap, formed as a result of the collapse of the pound to 31-year low the previous week.

Brexit in cartoons

Social networks are always able to accurately reflect what is happening - briefly and precisely, of course Brexit topics is not an exclusion. I have collected for you 16 of the finest memes and cartoons on the subject. Enjoy!

1. "Stronger together".

2. "Eutanic".

3. "Britanic".

4. "Quibble".

5. "The Big Dip".

6. "Reality".

7. "Turnabout".

8. "The flag is enough".

9. "Grumpy".

10. "The Big Push".

11. "Avant-garde".

12. "Crossroads".

13. "Scobrout".

14. "...".

15. "But I'm staying".

16. "Brexit".

Britons want to repeat the referendum

The preliminary results of the British referendum made Friday black for pound. the British currency has fallen against the US dollar with 11.93% (1792 points) to 1.3226 until the completion of the counting of votes in all districts. Traders sold the pound all over the market, so it was most feverish.
The euro/dollar fell less than three times than the pound, with only 516 points to 1.0911. The growth of euro/pound eased the pressure on euro. Gold rose in price by 8.63%, to 1358.21. Oil fell by 3.46% to $ 47.52.
When it became known that 52% of Britons voted for the country's exit from the EU, in the forex market started a correction. GBP/USD registeres pullback with 38% (754 points), euro/dollar recovered with 50%.
Bloomberg reported that the Swiss National Bank in response to Brexit made an intervention in the foreign exchange market to prevent the Swiss franc strengthened against the single currency. The regulator has promised to monitor the situation and keep their presence on the market.
The referendum will be discussed a few more days. Volatility declined, but remains high enough for the major pairs. Do any forecasts on exchange rates at the moment is meaningless.
Central banks and finance ministers of the G7 plan to hold a meeting on Brexit. British Prime Minister David Cameron has announced his intention to resign in October.
Perhaps it is not worth rushing the Brexit?! The Britons signed a petition to reconsider the referendum. They need to collect 30 thousand more signatures, so the document would be considered in the Parliament of Great Britain. In the petition they want a second referendum for Britain's membership in the European Union, which would be held according to EU law. Where the voter turnout should be at least 75%, and for one of the embodiments voted not less than 60% of people.

Brexit countdown started

The market yesterday has completely ignored the speech of the Federal Reserve Janet Yellen, as the countdown for the British referendum already started. According to members of the election committee, the first results will start to appear on Friday morning, and finally all will be clear "for breakfast."
The prolonged waiting period is over, and yesterday it became quite clear how much the markets are zombified by the referendum: they did not even pay attention to the Yellen's speech to the Senate. In part, this indifference, of course, due to the fact that the Fed has lost confidence and made mistakes, as a result of which investors do not pay attention to the comments of the Central Bank, and monitor the incoming data.
The quote of the week belongs to Yellen, who said yesterday that "the Fed does not rely on a statement of intent", as, indeed, the markets. The head of the central bank is still optimistic about the US economy, but she is worried about the situation in China, as well as the prospect of Brexit; while in Bloomberg agency noted a slight downward change in forecasts for the economy.
According to some sources, the voting results will appear throughout the night and early Friday morning, while all regions are showing varying degrees of support for Brexit or staying in the EU. Of course, if the key regions demonstrate a clear desire to leave or stay, and the result will differ sharply from the expectations, the market will make some conclusions, that will lead to large-scale movements.
In addition, we should also consider the fact that the referendum is not binding, so even in case of victory of Brexit supporters, in the near future it could not change anything, as in accordance with Article 50 of the Lisbon agreement negotiations could drag on for two years. It is not excluded, that history will repeat itself with the referendum in France and the Netherlands on the EU Constitutional Reform in 2005, where people voted against it, but it still was held.
The Brexit scenario is almost completely excluded from the price, there is now more skewed towards the scenario that involves the preservation of the UK's membership of the EU. It will be worse if Brexit wins, especially if it's with a small difference - we'll have to bite our nails all night on Friday from tension. The probability of large-scale price volatility in the case of Brexit increased as the market has not really believe in such possibility. This means that it will be difficult to justify the reaction of traditional patterns of behavior during the key events of "sell on the rumor, buy on fact".

Markets are preparing for the British referendum

Toward the close of the week global markets come to life after a hectic week, and especially after Friday's "rally". The focus is the upcoming British referendum overshadowed the meeting of several central banks, economic releases and sentiment in the oil market. On Friday risky assets reduced force, the European government bond yields rose from record lows, the dollar has traded under pressure.

It turned out that the tragic events of Friday were the indirect cause of the abrupt change of sentiment in the global markets. The murder of a British MP Joe Cox stopped the campaign before the referendum and strengthen the hopes of saving Britain in the EU. Survey results still do not reveal a clear advantage for supporters or opponents of Brexit, which increased the degree of tension to the limit.

I still tend to favor, that Britain's membership in the Union will be saved. However, because of the uncertainty it makes sense to assess the potential extent of movement of cable in both directions. In case the status quo remains, the currency will show growth, however, the reaction will not be such a large-scale and long-term, such as in "exit" scenario. The victory of the opponents of "Brexit" will not cause significant changes. Markets will "rejoice" and soon will forget about this vote. And since the country's exit from the European Union will have a large-scale and long-term consequences, the downward pressure on the pound will be more pronounced and protracted. In this case, the euro also will fall as UK backdown would mark a violation of the integrity of the European region and may result a domino effect.

The fateful vote will take place on Thursday, June 23, and the results should be available on Friday morning. So the markets will have a tense week, the results of which will determine the mood of risky assets in the medium term.

Are you ready for Brexit?

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The webinar will be held on 02-nd of June, 7pm-8pm.
On the event will be discussed most likely scenarios of the Referendum, how the vote of the Britons will affect the pound, what are the moods of biggest market participants and more.

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By SEB forecast GBP/USD at 1.49 by the end of the second quarter

The high volatility of the pound and its decline for this year are associated with increased risk premium that investors demand for the outcome of the referendum in the UK for further membership in the European Union.
If the country decides to leave the union, questions arise about what will replace the membership in this community, as uncertainty for sure would have a negative impact on the British economy.
The latest opinion polls show that Britons still prefer to maintain the status quo, and it seems, that markets like it.
The high risk premium still remains and if Britain stays in the EU, we should expect growth of the pound, say analysts.
When the subject of a referendum in the UK remains in the background, investors will redirect their focus again on the British economy, and in particular the policy of the Bank of England.
The latest data on inflation and wage dynamics, however, showed no signs of price increases, so experts expect an increase in interest rates in the country by next year.