FX Board: Day zero
- Brexit vote decimates sterling, boosts JPY, USD
- Potential recovery spotted in AUD, NZD
- 1.38-40 remains key resistance as pound looks lower
- Sterling suffered losses of historic proportions as GBPJPY was down more than 15% at one point from the previous day's close and GBPUSD punched to new 30-year lows below 1.3500 intraday, with the volatility intensified by the sterling appreciation just before yesterday's results began rolling in.
- The chief safe-haven was the Japanese yen in the post-Brexit vote hours, with the US dollar providing secondary status and the Swiss National Bank apparently doing all it can to prevent the Swiss franc from strengthening as well. Intraday, the USDJPY rate looked "managed", judging from the price action, or perhaps as traders are unwilling to challenge the 100 level in USDJPY on the fear that the Bank of Japan lurks near there. In any case, one wonders if the USD safe-haven more or less matches its JPY counterpart for a time if risk-aversion continues to plague markets.
- Most other currencies were generally weaker in line with their "riskiness" in the immediate wake of the Brexit result, but we did see quite remarkable comebacks in the likes of AUD and NZD from the day lows, though not yet full enough recoveries to suggest a reversal just yet.
- The focus should be on today's closing levels and then how the action picks up next week to determine if the scenario is "one off shock with subsequent settling and uncertainty" or "the beginning of a durable trend".
- A note on the FX Board: for those wondering why the GBP trend reading is not more negative and likewise for the momentum, there are smoothing functions that take a couple of days to kick in, which means one-off shocks hit the indicator with a bit of a delay, especially in a case like we've seen in which sterling was heading higher before the one-day collapse.
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— Edited by Michael McKenna
John J Hardy is head of FX strategy at Saxo Bank