Kay Van-Petersen
PMI data, Q4 growth and GDP figures are on tap in week 43, but central-bank meetings could be the key events, says Kay Van-Petersen, macro strategist at Saxo Capital Markets.
Article / 22 June 2016 at 11:12 GMT

Mid-session Europe: An eerie calm

Saxo Markets


Foreign exchange

Overall, markets remain in something of a holding pattern ahead of tomorrow's UK ballot on European Union membership, but gold prices are starting to signal that investors may be pricing in a Remain vote.

If so, it's a gamble, as despite the recovery in pro-EU sentiment (particularly following the tragic murder of MP Jo Cox), polls still show the Brexit vote to be a close race.

Today sees Federal Reserve chair Janet Yellen testifying on monetary policy in the wake of a speech that wat largely ignored by markets yesterday. Her counterpart at the European Central Bank, Mario Draghi, was also out yesterday stating that the bank is prepared to deal with the fallout from a Leave vote.


  • US MBA Mortgage Applications (1100 GMT) 
  • Canada April Retail Sales (1230 GMT) 
  • US May Existing Home Sales (5.55M exp.) (1400 GMT) 
  • Fed chair Yellen to testify on monetary policy before House Panel (1400 GMT) 
  • US Weekly DOE Inventories (1430 GMT) 

Forex developments

FX markets remain in a holding pattern ahead of the Brexit vote tomorrow; flows have so far been limited with major ranges intact. Japan's finance minister was out stating that Tokyo is unlikely to proceed with unilateral FX intervention; coordinated G7 joint intervention being preferred. 

FX Options volatilities

At-the-money vols are trading a bit softer overall today so far. GBP risk reversals are moving to the extremes, with 1m 25d RR in GBPUSD trading at 10 vols for puts over calls, which is the highest seen in many years. 

Lower ATM and higher RR in GBP is also a natural relation between the lower probability of a Brexit, but if we do see a Leave victory we should expect an even bigger move lower in spot.

Fixed income

Bond markets have calmed ahead of tomorrow’s vote with opinion polls the only major factor able to move markets from here on and to the results are known Friday morning. 

Markets remain positioned for a Bremain outcome with the 10-year German yield firmly positive at 0.05% and XOVER credit spreads at 340 basis points. This leaves upside somewhat limited ahead of the vote in our view, and a Brexit will lead to very a dramatic reaction given current confidence of investors. 

However, we believe such a dip could present a huge buying opportunity for investors – for more on that read our Weekly Bond Update on




European equity markets continue the recent advance despite investors avoiding big bets ahead of tomorrow’s UK referendum. Volumes are decreasing as we approach the final countdown.

Fed chair Janet Yellen delivers her second testimony to the Congress on the economy and monetary policy today after reiterating yesterday that the Fed will proceed cautiously in raising rates with the possibility of Brexit and other risks.

Germany’s Dax 30 gains 0.39% to 10,055, France’s CAC 40 gains 0.20% to 4,375, UK FTSE 100 rises 0.20% to 6,238, Spain’s Ibex loses 0.08% to 8,660, and the Italian FTSE MIB falls 0.66% to 17,312.

Oil stocks gained as WTI crude climbed to $50/ barrel boosted by expectations of a drop in US oil supplies ahead of this afternoon’s inventories.

US futures are pointing to a muted open.


For more Brexit research click here.

The replay of our Morning Call can be found here.

Join our Weekly OptionsLab on Wednesday  to find out more on covered call strategy.

Read more

Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.

London  The day before: All eyes remain on the UK as it goes into the polls tomorrow. Photo: iStock

— Edited by Michael McKenna

The Global Sales Trading desk is a multi-asset team providing customised trading solutions


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