It's all about Brexit

21 June, 2016

There was no escaping the size of the sterling surge yesterday, with cable seeing the biggest 1-day move since mid-December 2008. The rally was built on a growing belief that the UK referendum on EU membership is going to be a lot closer than was believed last week. The correction higher was also seen on equities and also other risk asset that have been under pressure over the past week or more as investors have retreated. EURCHF saw its biggest one day up-move since early March of this year. The correlation between sterling and the message from the polls and also betting markets has been increasing ever more over the past month, the two week correlation between cable and the betting probability of remaining in the EU is now 0.72, from near zero towards the end of May.

For now, it’s hard to escape the impending vote on Thursday. Yellen testifies before the Senate Banking Panel this afternoon, so we’ll get her latest update on the state of the economy and outlook for policy. But the outlook remains for rates to go nowhere and this is limiting the volatility on the dollar. Otherwise, the data calendar is on the thin side today, leaving Brexit sentiment as the dominant theme. It’s hard to see this changing between now and Thursday, given the continued level of undecideds in the polls together with the other unknowns (such as turnout) which mean that we really won’t know the result for real until the early hours of Friday.


Source link  
US Inflation Disappoints

US Consumer Price Index data was released and failed to impress the markets. With US gasoline prices spiking, following the disruption caused by the recent Hurricanes...

Can CPI Follow PPI Lead?

In early Friday trading, the markets are relatively static as they wait, in anticipation, for today’s US inflation data that will potentially give confirmation...

Fed Minutes: Inflation Conundrum

USD broadly declined as the markets digested the release of last month’s FOMC meeting minutes. Many FOMC Members are still concerned...


UK output data falls but expectations rise

On Sunday, The Confederation of British Industry released their monthly indicator of output for UK manufacturers, retailers and service companies...

US Economy Growing Faster Than Forecast

Data released on Thursday indicated that the US economy grew at a faster pace in Q2 than expected. The US Commerce Department released...

New Fiscal Year Could See Changes

With many countries entering a new fiscal year in October, many investors are summarising this past year’s portfolio performance while setting new goals...


New US data did not add positive

Published data on construction activity in the US in August slightly exceeded expectations. The number of building permits reached...

Interest Rates in Focus

On Monday, at a speech at the International Monetary Fund in Washington DC, Bank of England Governor Mark Carney stated that any increases in UK interest rates in the future will be both...

US Data Fails to Impress

On Friday, the US Commerce Department released Retail Sales showing a drop of 0.2% in August, the biggest decline in 6 months. The markets had expected...

  


Share: