Article / 06 June 2016 at 8:00 GMT

From the Floor: Blockbuster Brexit poll sinks sterling

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  • US rate hike odds now sit just above 50/50 for 2017: Hardy
  • Rising yen sinks Japanese stocks following USD rout
  • Samsung shares gain 1%, still very undervalued: Garnry
  • Global weather patterns boosting agricultural commodities
  • EM versus core bond yields spread very extended: Fasdal
By Michael McKenna

Last week's nonfarm payrolls print was the "shot heard 'round the world," but it would appear that the US economy is firing blanks as the dramatically lower-than-expectations jobs data showed the world's largest economy is not ready to hike rates just yet.

In Britain, polls are showing a renewed level of public interest in an exit from the European Union and the pound is struggling to hold up under the weight. After hitting a local high of 1.4698 on May 26, GBPUSD has plunged to 1.4376 as new polling data suggest a strong 'Leave' constituency.

The latest downward move comes in the wake of a new survey published by the Daily Telegraph in which 69% of 19,000 respondents signalled their hope that the UK would cut its EU ties to Brussels. A mere 29% voted for the 'Remain' option.

Despite the poor print from the US, a soft German factory orders release, and the Brexit news, Saxo Bank head of equity strategy Peter Garnry reports than European stock futures have inched higher overnight.

Looking at single companies, Garnry reiterates his view that Samsung remains notably undervalued, adding that he expects the Korean electronics firm to beat forecasts for the second quarter.

Eslewhere, Garnry points to Betsson as a stock that has reached a "decent" valuation following a 33% downward move.

The turmoil seen in sentiment following Friday's negative (including revisions) NFP report has seen bonds rally, with Saxo Bank head of fixed income trading Simon Fasdal stating that "our focus is back on emerging market bonds".

Fasdal adds that the low payrolls print will likely serve as a shot in the arm for EM bonds as spreads between EM and core yields remain wide.

At the moment, the market is pricing the chances of a June rate hike at just 4%, with Saxo Bank head of FX strategy John Hardy reporting that the odds for 2017 as a whole now sit at just over 50/50.

"Even with all the noise out of the Fed, the market didn't price much in," says Hardy.

According to Saxo bank's FX head, however, USD weakness is likely to be relatively constrained this week after Friday's spike in EURUSD. In terms of the benchmark currency pair, Hardy adds that he sees 1.1420-25 and 1.15 as the key levels to watch.


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Source: Saxo Bank 

The weakened dollar is also making its presence known across the commodities sphere, says Saxo Bank head of commodity strategy Ole Hansen, with gold notably up in the immediate wake of the NFP print.

In crude oil markets, however, Hansen tells us that the soft dollar is just one of several factors traders must contend with, noting that rising US rig counts and Opec's recent unity are also playing into pricing as far as this asset is concerned.

In an overall sense, however, markets remain bullish on oil with longs outstripping shorts by the largest margin seen on a year.

Hansen also notes that the falling dollar, along with global weather trends, is helping the fantastical rally seen in agricultural commodities, most notably sugar.

All aboard?: A new Daily Telegraph poll shows Britons are ready 
to embark on a new, non-European future. Photo: iStock

Michael McKenna is an editor at
Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.


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