Ole Hansen
The Russian and Saudi energy ministers met ahead of Opec’s late-November deal, but Saxo Bank head of commodity strategy Ole Hansen says the future for oil remains cloudy.
Article / 06 July 2016 at 8:26 GMT

From the Floor: Post-Brexit angst returns with a fury

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  • Negative energy is building across markets – Hardy
  • Japanese 20-yr yield negative for first time – Moltke-Leth 
  • Spanish recovery could be damaged by Brexit – Garnry
  • Oil pressured by glut, demand worries and strong USD – Hansen
  • Gold targets $1,400 after biggest one-day jump since 2009 – Hansen
 By Clare MacCarthy

A second tsunami of Brexit anxiety washed over Asian markets overnight as worries about the ultimate and multiple adverse effects of Britain's decision to quit the European Union intensified. The damage was far-reaching and severe, Saxo Bank's strategists report in their morning conference call.

News that a pair of UK housing fund managers had blocked their clients from withdrawing assets sent GBPUSD to a fresh 31-year low, turned the yield on the Japanese 20-year bond negative for the first time in its history and sent that other sparkling safe haven  – gold – sprinting beyond its previous post-Brexit high.

Saxo's head of FX strategy, John J Hardy, calls sterling's overnight behaviour "a death spiral" and reports that the currrency fell beneath $1.280 at one point though it has since retraced some of those heavy losses. But just what could tame the momentum of this downhill roll is difficult to see.

"Negative energy is building across markets and I'm sure I can see what could clear the clouds of the type of sterling and yen volatility we saw overnight. If you look at the UK situation we're not going to get any kind of answer until there's a new leadership [of the ruling Conservatives] in place and that's going to take at least until September," Hardy says.

GBPUSD falls off a cliff in Asian trade
 Source: Saxo Bank. Create your own charts with SaxoTraderGO click here to learn more

"The reason for the overnight selloff is really renewed fears of the UK and European economies taking a turn for the worse. In addition, the Bank of England's financial stability report underscores the risks around the whole Brexit scenario," says Christoffer Moltke-Leth, from Saxo's Singapore trading desk.

One such hitherto ignored risk would be collateral damage to the Spanish economy's fledgling recovery, says Peter Garnry, head of equity strategy. "About 20-25% of all real estate deals in southern Spain involve UK citizens so that business would probably get crushed and that could dent that country's recovery."

WTI Crude looking for support at $45.8 with a break targeting $44.5
 Source: Bloomberg

Crude oil (chart above) is having a rough time too, says Ole Hansen, Saxo's head of commodity strategy, though he notes that its problems aren't confined to the Brexit-inspired risk aversion. It's also being pressed, he says, by ample supply, demand concerns and the stronger US dollar.

But where there's losers, there's winners too and once more, all the usual suspects – the Japanese yen, government bonds and precious metals – are surfing higher. Gold broke above its post-Brexit high overnight on low/negative yields and macro risks , Hansen reports. Furthermore, having enjoyed its biggest one-day jump yesterday since 2009 the yellow metal is now targetting $1,400/oz though a high RSI reading might hold it back.

 The British storm might dent Spain's fragile recovery. Photo: iStock

Clare MacCarthy is deputy 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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