- A favourable poll for the Remain camp pushed the GBP higher
- Rates rallied 9.4 basis points overnight as the risk of a Brexit dimmed
- Equities also enjoyed a 'Bremain' bounce; the FTSE 100 rose 182.91 points
By Saxo APAC Sales Trading
Another favourable poll for the Remain camp last night pushed the GBP much higher to reach the major resistance at the 200d MA at 1.4683. This level will be important to watch as we have not broken the 200d MA for the past two months and we should see some selling interest here unless a break is confirmed.
What happens when suddenly all the polls are favouring the Remain camp? The volatilities collapse and this is what happened: the whole curve trade is much lower, pricing out the Brexit, with 1M ATM going from 29 to 21 volatilities in less than three sessions. The 3M volatilities moved from 18.5 to 14.
Following the rest of the GBP market, rates rallied 9.4 basis points overnight with a risk of Brexit being much less important after the last polls. The market is also pricing less cuts. There is only a 15.5% chance of a cut priced in July.
Stock markets also enjoyed a "Bremain" bounce with the FTSE 100 soaring 182.91 points, or 3.04%, to 6,204, its biggest daily rise since mid-February. The change in sentiment has wiped £66bln back onto the blue chip index since Thursday.
Risky assets were back in demand with banking stocks leading the charge higher. The industry was hammered last week on heightened Brexit fears. Lloyds jumped 7.6% to 70 pence, Royal Bank of Scotland climbed 7% to 237.7p and Barclays added 6.7% to 176.9p. Challenger banks Shawbrook and Aldermore made gains of 15% and 7.1%, respectively.
Separately, Royal Bank of Scotland was also boosted by a Sunday Times report that said the bank had halted the marketing push for its Williams & Glyn brand until the first quarter of next year.
Research and comments
If the Remain camp wins, there will still be good value in some equities that have been hit hard ahead of the vote, such as the banking sector and the rally in rates could be more sustained.
Close camp ... there was another favourable poll for the Remain
vote last night. Photo: iStock
– Edited by Gayle Bryant