Graeme Wearden (until 2.10pm) and Nick Fletcher 

Pound slides as polls show Brexit support, as Yellen hints at US rate rises – as it happened

Sterling has dropped against other major currencies after the latest EU referendum polls show the Leave campaign in the lead
  
  

Canary Wharf on the Isle of Dogs in East London.
Canary Wharf on the Isle of Dogs in East London. Photograph: Philip Toscano/PA

Sterling is little changed after Fed chair Janet Yellen’s comments that US rates could gradually rise without specifying when that might happen, with investors more preoccupied with the Brexit polls showing the Leave camp in the ascendency.

The pound is currently down nearly a cent at $1.4451, while against the euro, the UK currency has weakened slightly again, down 0.49% at €1.2708.

Meanwhile the dollar has lost some of its earlier gains against the yen, now up just 0.4% in the wake of Yellen’s speech.

On that note it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.

Updated

In her comments at Harvard at the end of May, Yellen talked about it being appropriate to raise US interest rates “in the coming months”.

Now she has repeated that “further gradual increases in the federal funds rate are likely to be appropriate” but the timescale appears to have gone.

Yellen concludes:

To summarize, I have explained why I expect the U.S. economy will continue to improve and why I expect that further gradual increases in the federal funds rate will probably be appropriate to best promote the FOMC’s goals of maximum employment and price stability. I have also laid out the considerable and unavoidable uncertainties that apply to both this outlook for the economy and to the appropriate path of the federal funds rate. My colleagues and I will make our policy decisions based on what incoming information implies for the economic outlook and the risks to that outlook. What is certain is that monetary policy is not on a preset course, and that the Committee will respond to new data and reassess risks so as to best achieve our goals.

Updated

Yellen warns on Brexit

She pointed to a number of uncertainties for the global economy, including US domestic demand, the outlook for economies elsewhere and the prospect of Brexit:

One development that could shift investor sentiment is the upcoming referendum in the United Kingdom. A U.K. vote to exit the European Union could have significant economic repercussions.

Yellen’s speech is available here, with a live link here.

Friday's poor jobs data "concerning" - Yellen

On the poor US jobs figures on Friday, she said:

Although this recent labor market report was, on balance, concerning, let me emphasize that one should never attach too much significance to any single monthly report. Other timely indicators from the labor market have been more positive. For example, the number of people filing new claims for unemployment insurance--which can be a good early indicator of changes in labor market conditions--remains quite low, and the public’s perceptions of the health of the labor market, as reported in various consumer surveys, remain positive. That said, the monthly labor market report is an important economic indicator, and so we will need to watch labor market developments carefully.

Updated

Yellen: expect gradual US rate rises

Federal Reserve chair Janet Yellen still expects further gradual increases in interest rates, although she said monetary policy would depend on the outlook for the economy:

If incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate and most conducive to meeting and maintaining those objectives. However, I will emphasize that monetary policy is not on a preset course and significant shifts in the outlook for the economy would necessitate corresponding shifts in the appropriate path of policy.

Updated

Janet Yellen is up shortly, speaking to the World Affairs Council of Philadelphia.

European stock markets end higher

Despite fears about the consequences of the referendum on whether the UK should leave the EU, equities are holding their nerve, lifted by a strong performance from commodity companies. The FTSE 100, filled as it is with mining businesses, has outperformed other markets as the recent dollar weakness helped support metal prices. The UK index seemed unfazed by volatility in sterling as a number of new polls showed the Leave campaign in the ascendency. The final scores showed:

  • The FTSE 100 finished up 63.77 points or 1.03% at 6273.40
  • Germany’s Dax added 0.18% at 10,121.08
  • France’s Cac edged up 0.04% to 4423.38
  • Italy’s FTSE MIB was 0.74% better at 17,625.00
  • Spain’s Ibex ended 0.25% higher at 8823.5
  • But in Greece, the Athens market slipped 1.47% to 639.11

On Wall Street, the Dow Jones Industrial Average is currently up 117 points or 0.67%.

Commodity companies are supporting stock markets, not least because of the recent weakness in the dollar following Friday’s poor US jobs numbers.

Oil has also moved sharply higher, with Brent crude now up 1.9% at $50.58 a barrel after output in Nigeria was hit by militant attacks on oil infrastructure. Meanwhile there was a 1m barrel drop last week in inventories at Cushing, the delivery point for US crude, according to information group Genscape.

The pound is still lower after the raft of EU referendum polls showing the Leave camp in the ascendency, but the currency has come off its worst levels.

Sterling is currently down around a cent against the dollar at $1.4467 having hit $1.4381 earlier. The move is complicated by the US currency being affected by the uncertainty over when (or if) the Federal Reserve will raise interest rates this year. Investors are hoping for some clarification from Fed chair Janet Yellen shortly.

Meanwhile against the euro, the pound is currently down 0.34% at €1.2725 having reached €1.2661 earlier.

Updated

The chance of a June rate hike in the US is much lower now after the poor jobs numbers last week, according to St Louis Fed president James Bullard, but July is still a possibility.

In comments to the Wall Street Journal he also said Brexit was not a significant risk for the Fed.

Updated

Over in Greece, and another deadline apparently looms:

So when might the Fed hike rates? Perhaps not even this year, some believe. Christopher Vecchio, currency analyst at DailyFX, said:

The May US labor market was the exact type of jobs report that could that could upend Federal Reserve policymakers’ hopes of raising rates in June. Remember in January when the Federal Open Market Committee was suggesting it was still going to raise rates four times this year? That was an odd notion then, and it outright laughable now.

Before Friday’s labor market report, the Fed funds futures contract was implying around a 22% chance of a rate hike in June. Today, it’s pricing just 4%.

Markets have quickly scaled back expectations of any further tightening this year, with the only rate hike projected to come in December (58.5% chance). Still, that’s unconvincing, considering that the Fed has never raised rates unless the Fed funds futures contract has implied at least a 60% chance of hiking rates in the front month. Markets themselves aren’t fully convinced that another hike is coming this year.

This doubt about further policy normalisation by the Fed in 2016 is well-founded. We continually express our disbelief that the Fed (or the ECB for that matter) would announce a significant change to policy without concurrently releasing new staff projections and letting Fed Chair Janet Yellen hold a press conference to try and soothe markets.

In an effort to become more transparent, central banks have become more predictable. Skipping ahead past June, September is the next time the Fed would have a staff projections update and press conference, but it seems highly unlikely that any policy tightening will be done on the doorstep of what’s already a vicious US Presidential election.

Federal Reserve chair Janet Yellen is likely to hint at further rate rises later this year at her speech today, despite last week’s poor US jobs numbers, says Reuters. But an increase this month looks off the table:

Federal Reserve Chair Janet Yellen will likely keep the door open to an interest rate hike within the next few months when she speaks on Monday, while striking a balanced tone about recently disappointing jobs growth and mixed signals in the U.S. economy.

Yellen’s speech to the World Affairs Council of Philadelphia at 12:30 p.m. ET (1630 GMT) will address the economy and monetary policy, and is the last public comment by U.S. central bankers before their June 14-15 meeting.

The chances of a rate hike at that meeting were all but killed by a report showing the U.S. economy added only 38,000 jobs in May, muting recently upbeat data on consumer spending and overall growth. A sensitive British vote on European Union membership set for later this month is another reason for the Fed to wait.

Economists now see July or September as more likely timing for a quarter-point policy tightening, after the central bank lifted off from near-zero rates in December.

The full story is here.

Wall Street rises at open

US markets have joined in the general positive mood for equities, ahead of the speech later from Federal Reserve chair Janet Yellen.

The Dow Jones Industrial Average is currently up around 100 points or 0.5% while the S&P 500 and Nasdaq both opened in positive territory.

More signs of Leave gaining ground, from spread betting firm IG:

It will be a long night for City traders on 23 June, the day of the EU referendum.

According to Bloomberg a number of banks, including RBS, JP Morgan, Lloyds Banking Group and Morgan Stanley plan to keep traders in place overnight to monitor market movements as the results unfold.

The full story is here.

Brexit risk justifies US rate patience - Fed's Lockhart

For hints at the timing of further US rate rises, all eyes are on a speech later from Federal Reserve chair Janet Yellen.

But ahead of that Atlanta Fed president Dennis Lockhart has urged patience following Friday’s disappointing US jobs numbers, telling Bloomberg the economy is on track for only moderate growth and Brexit is a risk for the economy.

Updated

Commerzbank: Markets unprepared for Brexit win

The pound’s volatility in recent days shows that City traders have been rapidly revising their expectations on this month’s referendum.

Ulrich Leuchtmann at Commerzbank sums things up (via the FT)

“The market has become too comfortable with its ‘things will work out all right’ approach. [It] would be far less prepared for a Brexit outcome than for a ‘Bremain’. That is the reason why these polls receive far more attention and move the market much more than those polls that still see a lead for ‘Bremain’.”

And that’s why the cost of insuring against wild swings in the pound over the next month is at its highest levels since the financial crisis:

Updated

The Telegraph have pulled together a few interesting charts on the Brexit issue (click on the tweet to scroll through them).

Jeremy Cook, chief economist at currency firm World First, reckons the pound could fall sharply in the next couple of weeks.

He says the pressure on sterling has intensified, now that several polls are showing the Leave side in the lead.

“Sterling and Brexit remain odds; falling together like Icarus on a hot Monday in London. With 3 weeks to go I do not think it is incorrect to say that it is anyone’s to win; Leave have the momentum and opinion polls are frankly a mess; the differential between online and telephone polling has broken down. Given the level of campaigning, which has been abysmal, it is no surprise that polling is so confused; the electorate is confused and I think polls are showing more of an off-the-cuff-which-way-the-wind-is-blowing-at-this-particular-moment voting intention, not longer held beliefs. In this atmosphere momentum is key; the Remain camp has to get agitated.”

“It seems to be however that the economy is not what agitates British voters anymore and once someone makes immigration their top voting priority there is little than can shift that, regardless of how much of a monetary hit may be forthcoming.”

Although the pound is down, shares in London have actually risen to a one-week high today.

The FTSE 100 index of blue-chip shares has jumped by 60 points, or around 1%, to 6268 points.

The rally is led by mining stocks, who are benefitting from rising commodity prices today. That’s because the US dollar has fallen against most currencies (but not the pound, obviously), following the disappointing American jobs figures on Friday.

Here’s our news story on today’s Remain campaign event:

University of Kent professor Matthew Goodwin has crunched the latest polling:

The ‘Purdah’ period began on Friday 27 May, meaning the government cannot use the civil service to push the Remain side’s message.

ICM poll puts Leave in the lead

Breaking: ICM have just issued a poll showing that the Leave campaign hold a five-point leave over Remain, at 48% to 43%.

It’s their regular online poll, which took place after Sky News held two debates last week - one with David Cameron, and one with Leave campaigner Michael Gove.

ICM says that the polls appear to have moved:

After a fairly tumultuous week in which both Prime Minister and Michael Gove set out their stalls on TV, ICM’s weekly tracker and indeed at least two other polls published in the last 24 hours, suggest a move to Leave might have occurred.

Our poll today has Leave on 48% (+1), Remain on 43% (-1) with Don’t Knows still on 9%. This equates to a 53% vs 47% lead for Leave.

Our poll somewhat reinforces a Yougov poll this morning which found a 4-point move to Leave, and polls from TNS and Opinium which also gave cause for concern for the Remain camp.

All these polls were conducted online, however, and outside of ICM’s unexpected leap toward Leave in our phone poll last week, no other evidence has been forthcoming from phone polls that Remain are falling back. If new phone polls do emerge with such an outcome, however, we could be more confident that – irrespective of where the actual standings are on a poll-by-poll basis – Leave have pushed on.

Turnout levels appear to be surging. Caution is always advised when it comes to polls estimating actual turnout, as polls nearly always overstate it, but the 10/10 certainty figure has nudged up to 71% now, suggesting that the public are now more engaged with the referendum than at any previous point.

Buzzfeed’s Alberto Nardelli explains that this equates to a six-point margin (once don’t knows are removed):

The pound had been recovering a little, but this poll has sent sterling reeling back towards its three-week lows.

That means it has shed one and a half cents against the US dollar, to $1.4381.

Updated

Cameron says leaving the EU would 'put a bomb under our economy'

David Cameron has been speaking at the Britain Stronger in Europe event.

The prime minister had pointed to the economic uncertainty of Brexit, claiming that leaving the EU would ‘put a bomb under our economy’.

Cameron predicted an “immediate shock effect” from a Leave vote:

Almost everyone now agrees, from the Governor of the Bank of England to the IMF, the OECD to the Treasury, 9 in 10 economists to, yes, even some Leave campaigners, there would be an economic shock if we left Europe.

Let’s be clear what that means:

The pound falling; prices rising; house prices collapsing; mortgage rates increasing; businesses going bust; and unemployment going up.

In other words: a recession.

And he also argues that British trade would suffer badly, during years of uncertainty as politicians tried to negotiate an exit from the EU.

Think of the impact on BMW, for example. 80 per cent of Minis are exported.

Think of the wider impact: fewer businesses, fewer jobs, a smaller economy and less money for our schools and hospitals.

Add those things together – the shock impact, the uncertainty impact, the trade impact – and you put a bomb under our economy.

And the worst thing is we’d have lit the fuse ourselves.

He was speaking alongside Labour’s Harriet Harman, Lib Dem leader Tim Farron and Green leader Natalie Bennett.

Our EU Referendum Live blog has full details:

Updated

Today’s selloff means the pound has shed 2% of its value in the last fortnight.

Darren Ruane, head of fixed interest at Investec Wealth & Investment, says sterling is suffering the brunt of Brexit uncertainty.

Although bookmakers’ odds continue to show a victory for the Remain campaign, any signs that the vote’s result is closer than previously predicted is likely to affect the UK’s currency by the greatest amount relative to other asset classes.

Currencies are often good barometers of international investors’ confidence in the economic outlook for a country.”

The YouGov report also finds that the public don’t trust certain politicians over the EU referendum.

David Cameron has particularly poor trust ratings, it appears, with 19% of those polled trusting the PM, and 72% not trusting him.

Alexandra Russell-Oliver, analyst at currency firm Caxton FX, reckons this is a factor:

“Many Leave campaigners have cited distrust for the Prime Minister as a main reason for backing Brexit.”

The YouGov results are online here.

Updated

YouGov has also found that a majority of people back the Leave campaign, even if Brexit hit them in the pocket.

Its new poll asked people to imagine that they were £100 per year worse off after a Brexit; 44% of people said they would vote to leave, while 42% would vote to remain.

A month ago, this question showed a small majority for Remain.

The latest car registration figures suggest that EU uncertainty may be hitting consumer confidence.

The Society of Motor Manufacturers and Traders (SMMT) just reported that sales to private customers fell by 3.0% year-on-year in May. Total sales rose by 2.5%, though, thanks to higher demand for “fleet buyers” (such as car rental firms).

SMMT CEO Mike Hawes says the market appears to be cooling in the face of the EU referendum.

Whether this is the result of some buyers holding off until the current uncertainty is resolved or a sign of a more stable market for new cars remains to be seen.”

YouGov have just confirmed that their latest poll shows a move towards Brexit:

Labour MP Stephen Kinnock fears that the political infighting between Conservative politicians is distracting from the serious questions around Brexit.

Speaking on Bloomberg TV a moment ago, Kinnock warns there could be a “constitutional crisis” if the Leave campaign wins, as we don’t know what relationship Britain would seek with the EU.

We need a better discussion about what a post-Brexit UK would look like.... What trading arrangements we would have, the relationship with the single market. the two million British people living outside the UK.

Kinnock adds that “leaving the single market would wreck the UK economy”, and that the steel industry in his Welsh constituency (home of the Port Talbot steel works) would be finished.

[Kinnock’s father Neil, incidentally, is a former European Commissioner]

But former chancellor Lord Lawson is arguing that it’s “baloney” to argue that Britain’s trade would suffer badly if it left the single market.

Most of the world is outside the single market, and most of the world is doing better than the countries in the single market.

According to the BBC, some Remain campaigner are considering using their Commons majority to keep Britain inside the EU single market if there is a vote for Brexit.

Updated

Pound down against every major currency

The pound has fallen against every other major currency this morning, following the string of opinion polls showing the Leave side leading the referendum battle.

Bloomberg’s Garfield Reynolds writes that sterling suffered a “very ugly start” to the week:

With less than three weeks to the June 23 referendum, investors have been disconcerted as the ‘Leave’ campaign gains traction.

The currency dropped as much as 1.1% to $1.4353 on Monday and was down against all 16 major peers, while one-month volatility surged to 21.34 percent, a level last seen in February 2009.

And this chart shows how the pound fell against the US dollar (white line), while sterling volatility spiked (as explained earlier).

Updated

This chart highlights how the pound has weakened against the euro in the last couple of weeks, hitting a three week low today (the blue line):

Updated

James Appleyard of risk management group Maplethorpe also expects a lot more sterling volatility:

Our rivals at the Daily Telegraph have also helped to send the pound sliding today, analysts say.

A survey of almost 19,000 Telegraph subscribers found that 69% are intending to vote for a Brexit at the June 23 referendum. The poll also found that Leave campaigner Boris Johnson is their favoured candidate to succeed David Cameron as prime minister.

FXTM chief market strategist Hussein Sayed says this report has hurt sterling:

This was the most shocking survey released so far, and with only 18 days until the referendum the GBP is extremely sensitive to opinion polls. YouGov and TNS online polls didn’t help either as both revealed that the leave campaign has picked up momentum and now leads over remain voters.

Given the Telegraph’s traditional audience, it’s perhaps not such a surprise – but it may have surprised global investors who don’t have a tight grip on UK media habits....

Updated

Sterling is likely to experience wild swings in over the next few weeks, in the run-up to the referendum.

Craig Erlam, senior market analyst at foreign exchange company OANDA, explains:

“The polls are likely to make people rather uneasy and we can see that quite clearly today in the pound.

“With both sides likely to step up their game over the next couple of weeks, I imagine we’ll see a lot more volatility in the pound and the closer the polls get, or if ‘Vote Leave’ continues to push ahead, the pound may find itself back towards April’s lows before too long.”

(via Reuters)

The pound’s early morning slide came as the Remain campaign prepares to accuse the Leave side of trying to con voters about the consequences of Brexit.

My colleague Claire Phipps explains:

David Cameron might not want to face fellow Conservatives in debates over Britain’s future but today he’ll issue a statement with politicians usually found on the opposite side of the Commons, teaming up with Labour’s Harriet Harman, Lib Dem leader Tim Farron and Green party leader Natalie Bennett to label the Brexit campaign a “con-trick”.

Together they’ll accuse Leave campaigners – including the prime minister’s own party chums Michael Gove and Boris Johnson – of producing “contradictory statements” about Britain’s economic future outside the EU, saying the Brexiteers have put forward 23 different positions on the alternative to the single market.

Full coverage in our EU Referendum liveblog:

And Britain’s trade unions are warning that workers’ rights could be swiftly eroded after a Brexit vote.

Our frontpage story explains:

In a joint intervention, the general secretaries of Unite, Unison, the GMB and Usdaw were among 10 trade union leaders warning that the Conservatives would “negotiate away our rights” if the UK decides to leave.

They argued leaving the EU would pose a great threat to maternity and paternity pay and leave, the right to paid leave for holidays and equal treatment for full, part-time and agency workers.

Shares in UK housebuilders are under pressure this morning, matching the slide in sterling.

Berkeley Group, Persimmon, Barratt Development and Taylor Wimpey are the biggest fallers on the FTSE 100 this morning.

Bloomberg’s Caroline Hyde blames Brexit fears:

Some economists believe that the Bank of England could be forced to raise interest rates if Britain votes to leave the EU, to fight a plunge in the pound. That would obviously drive up mortgage costs.

Updated

Sterling volatility hits seven year high

Traders are scrambling to protect themselves against the pound plunging after this month’s referendum.

The cost of insuring against sterling volatility has hit its highest level since the wild days following the collapse of Lehman Brothers.

That shows that investors are expecting sterling to move sharply after the result of the EU vote is known.

FastFT have the details:

One-month implied sterling volatility, or the price of insuring against swings in the pound against the dollar, has jumped to 21.9, the highest since February 2009. It hasn’t topped 15 in six years.

Updated

Sue Trinh, head of Asian foreign-exchange strategy at Royal Bank of Canada in Hong Kong, says the EU referendum could easily roil global markets.

“A ‘Leave’ vote would expose a host of uncertainties.

“It would be more negative for the euro and the EU since the issue will drag on for other members.”

That’s via Bloomberg:

Pound hit by polls showing Brexit momentum

The pound is sliding this morning after a string of opinion polls gave the Brexit campaign a lead in the 23 June EU referendum.

Sterling tumbled in early trading, shedding more than 1.5 cents against the US dollar. It has hit a three-week low of $1.4355, down 1.1%.

It is also losing ground against other developed currencies. Against the euro, the pound is down 1 eurocent at €1.2661.

Traders are reacting to yesterday’s Observer/Opinium poll, which gave the Brexit campaign a three percentage point lead.

As my colleague Daniel Boffey reported:

The leave campaign has picked up momentum and taken a three-point lead over remain in the latest Observer/Opinium poll on the EU referendum. The Brexiters now stand on 43%, while 40% say they support the campaign to keep the UK in the union.

The poll suggests the remain camp has lost four percentage points in the last two weeks, during which Boris Johnson and Michael Gove have relentlessly campaigned on the theme of immigration.

And aYouGov poll for ITV’s Good Morning Britain has put Leave in front on 45% and Remain on 41%, according to overnight reports.

Many analysts have predicted that the pound would tumble if Britain voted to leave the EU, possibly as low as $1.20 against the US dollar.

Michael Hewson of CMC Markets confirms that the City is reacting to signs that the Brexit campaign is gaining momentum.

The pound looks set to start the week on the back foot as the opinion polls continue to point to an increasingly close contest in the UK referendum as speculation increases about further gains in the polls for the leave camp.

The agenda: Markets await Yellen speech

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

There’s a new bout of jitteriness in the City today, after last Friday’s US employment report missed expectations by a mile. The news that just 38,000 new jobs were created in America last month has sparked fresh worries about the global economy.

So there’s a lot of interest in a speech from Janet Yellen, head of the US Federal Reserve, later today (5.30pm BST). Could she hint that a June rate rise is less likely?

Analysts at RBC predict that Yellen could move the markets:

The chance of a July hike dropped from 65% on Friday morning to 32% by Friday afternoon,which seems reasonable, but Yellen’s speech today could push that back above 50% or closer to zero, so either way, the chance for a US dollar move seems high.

Investors are also worrying about Britain’s EU referendum, on June 23rd, with the latest polling suggesting the vote is tight.

At 9am, we find out how many new cars were sold in the UK in May. A poor number could show that Brexit worries are hitting consumer confidence.

In the eurozone....

We get a new healthcheck on Germany’s economy, with new factory order and construction data this morning. Worryingly, factory orders have fallen by 2% month-on-month.

And Italy will also be in focus, after the anti-austerity Five Star Movement took a large lead in the first round of voting for the mayor of Rome.

 

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