UK: Sterling testing 1.44 support after weak construction output data - BBH

Research Team at BBH, notes that the UK reported weak March construction output as it came in at -3.6% m/m vs. -3.2% expected, and continues a string of soft economic data as Brexit nears.

Key Quotes

“BOE left policy unchanged yesterday, but it marked down its growth forecasts for 2016 and 2017, and warned of negative global Brexit spillovers. There is one more BOE meeting (June 16) before the Brexit vote on June 23. The tone from the BOE is one of rising concern, and the bias is clearly dovish.

Sterling is testing support again around the $1.44 level. A break below the $1.43 area is needed to set up a test of the April low near $1.40. We note also that 2-month vol is at new 6-year highs while the 2-month risk reversal is at a new record extreme.”