Judgement Day

23 June, 2016

The one thing that is guaranteed overnight tonight is volatility, as the UK vote on EU membership has finally arrived. Polling stations close at 22:00 local time, with results then being counted across the 382 counting areas. The final result will be announced at the start of the European session tomorrow, but may become clear earlier should the results show a comfortable margin for one side or the other.

The market is priced towards the UK remaining in the EU, but not fully. Should we see this come to pass, then the currency will breathe a decent sigh of relief. For cable, this could see a move up to the 1.53-54 level. A vote to leave would be a more complex scenario. Cable could easily move down to the 1.32-33 area initially. We’d see some dollar safe-haven bid, together with sharp moves in both the yen and Swiss franc. The latter could be vulnerable to central bank action to quell the rise in the currency. Both central banks were happy to stand by ahead of the vote, but both are uncomfortable with the level of their respective currencies and the SNB is probably better positioned to do something about it. Japan would probably want some support from its G7 counterparts. As we know, the SNB do their own thing. In the Brexit scenario, we’d also see the government move to downplaying the risks to the economy, underlining the fact that nothing will change in the immediate future. Combine this with the intervention risks on safe havens, then cable could well bounce from the lows in the following hours and days.

But it’s not just currencies affected; equities have been dragged into the storm as well. On the ‘remain’ scenario, the FTSE could well jump to the 6,500 level (up just over 6%). As with the currency, the brexit scenario is a lot harder to determine. As we know, a good proportion of FTSE revenues come from overseas, so whilst some sectors will be hit harder (retailing, house-building), others should be more insulated. Still a 15% fall is still possible, down to the 5,300 level. Again, the government will talk up the economy and downplay the impact of the vote.

For now, it’s just a matter of waiting.


Source link  
Market Sentiment Hinging On Progress In Brexit

The British parliament will vote on the Brexit agreement today at 18:00 GMT. In theory, this should be a simple vote, with a definite...

Market shows demand for yielding assets

The market shows demand for yielding assets, which in turn supports demand for the stocks and currencies of emerging markets. The main...

Yuan and Dollar as a weapon in trade wars

The US Nonfarm Payrolls on Friday could even be called boring: the report showed the preservation of a completely healthy labour market...


Disappointment with Fed and tariffs

Trump announced 10% tariffs on Chinese goods worth $300 billion since September 1, thus ending the US-China trade truce after disappointingly...

Fed pushes down stocks

Markets have started the week under pressure. Expectations that the Federal Reserve will cut interest rates by 50 points in July collapsed...

Gold updates new 6-years highs

Gold benefits from a combination of two factors: lower interest rates in debt markets and continuing hopes that the global economy...


Markets recede from the recent highs

A strong Nonfarm Payrolls caused pressure on the stock markets, reducing the chances of the interest rates lowering by the Fed in the upcoming months...

Gold resumes rally, pushing past $1400

Gold prices resumed a push higher on Monday, as flows into the precious metal continued on improved prospects for easier monetary policy from...

Gold rises as markets slip

Market caution continues to support gold. Quotes of this metal rose to $1337, repeatedly trying to push above this year highs at the 1340-1360 area...

  


Share it on:   or