Sterling has started the week unable to hold onto last week’s positive momentum by moving sideways against the US dollar and on the Euro.
The looming June 23rd referendum is still a worry, and this loss in strengthening could well be attributed to investors moving away from riskier assets. Sentiment was also weighed down as two key members of the Remain camp, Cameron and Osborne, warned that leaving the EU could push the UK into a yearlong recession and cost at least 500,000 jobs. Whether this is scaremongering, or based on reliable data and forecasting, remains to be seen. Has last week’s surprise outperformance come to a head as the summer buzz wears off and the reality of the “Brexit” with a month to go will dominate debate?
Tuesday’s public finance data could undermine the appeal of sterling if new government debt is found to have widened markedly. Higher Public Sector Net Borrowing would be seen as an increase in the risks to the UK economy in the event of a ‘Brexit’. This would also reduce the chances of Chancellor of the Exchequer George Osborne meeting his pledge to eliminate the deficit before the end of the current parliament in 2020 and further diminish demand for sterling.
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