Pound Recovery May Continue As Markets Shrug Off Brexit Fears

UK PMI data headlines the European data docket. The catch-all Composite index is expected to show the pace of manufacturing- and service-sector activity growth slowed in February after hitting a six-month high in January.

Soft factory-sector and construction PMIs earlier in the week failed to stymie a British Pound recovery. The currency posted the latest daily gain versus the US Dollar in a month in yesterday’s trade after demand rose and yields declined at an auction of five-year bonds, pointing to investors’ confidence despite the looming “Brexit” referendum.

This coupled with an already steep slide in the priced-in BOE rate hike outlook and build-up in speculative net-short exposure is likely to make the UK unit relatively resilient in the face of negative news flow. Alternatively, an upside surprise may fuel unwinding of short GBP positioning, extending the currency’s recovery.

The anti-risk Japanese Yen underperformed while the sentiment-geared Australian and New Zealand Dollars traded higher alongside Asian stock markets as the markets’ mood brightened in overnight trade. The MSCI Asia Pacific regional benchmark equity index rose 0.8 percent.

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