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From the Floor: 'GBP rally done and dusted' – #SaxoStrats

Sterling has been blasted lower after BoE governor Carney cast doubt on a previously pretty-much-expected UK May rate hike. The EU's rejection of Britain's latest Brexit-Irish border plan only served to deepen the rot.

Article / 20 June 2016 at 7:01 GMT

Morning Markets: 'Remain' surge boosting risky assets

Michael S. McKenna

Head of Editorial Content / Saxo Bank

Denmark

Morning Markets: Prices

Watchlist

Germany: Monthly PPI (0800 GMT)
Germany: German Buba Monthly Report (1200 GMT)
Canada: Wholesale Sales m/m (1430 GMT)

A dramatic shift in UK bookmakers' sentiment has seen Brexit fears recede, boosting the fortunes of sterling as well as commodity currencies, the US dollar, the euro, and risky assets in general. Polls are showing renewed strength for a Remain vote in the wake of the tragic murder of pro-EU member of parliament Jo Cox.

The sudden turnaround in sentiment was seized upon by British prime minister David Cameron, who cited Cox's slaying on Twitter – a move that many found distasteful, but that nevertheless accompanied a widespread turnaround in apparent voter sentiment.

Gold prices dropped in USD terms from their late-Friday highs near $1,300/oz as risk-off buying evaporated while crude oil prices spiked higher this morning, boosting the Canadian dollar and assisting the overall return of risk sentiment to world markets.

Monday features a light data calendar meaning that trend continuation and headline risks will likely be the main drivers on the day. New data from the US tomorrow and Wednesday will determine whether this latest rally in both WTI and Brent crude is ready for prime time.

Market signals

Asian session

Japan's exports fell for an eighth consecutive month in May
Overseas shipments declined 11.3% in May from a year earlier,
British voters will decide the fate of gold prices this week
The GBP is becoming a barometer for risk sentiment
Reserve Bank of India governor Raghuram Rajan to step down earlier than expected
Rajan was under pressure for keeping interest rates high
New Zealand consumer confidence fell to 106 in the June quarter, down from 109
Japanese stocks post robust, 2%-plus breakout as risk returns
SHCOMP slides lower on open, but afternoon rally sees green ink return

Forex ahead

Euro gaps higher versus USD as Brexit fears wane
Sterling tops 1.46 before retracing slightly as vote odds shift
USDJPY gaps higher by 0.63 as risk-off trend dissipates
Australian dollar rallies north of 0.7450 versus the greenback
USDCAD sliding towards 1.28 as commodity currencies rally

From the Floor

Brexit countdown. “A lot of the gains are in the ‘undecided’ vote rather than the remain so the outcome is still very uncertain”, says Hardy

‘Bremain’ tilt. “Gold needs to get back above $1,300/oz to rekindle the excitement of last week”, says Hansen

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1..2..3
The 'leave the EU' campaign in Britain is bringing out risk-off sentiment in just about all trading markets, including the US, says James Picerno.

UK's global power
Such is the extent of Brexit, that the vote one way will have enormous ramifications for a number of currencies and commodities, as Saxo's Asia team explains.

'I would do nothing'

All too often, politicians spend their time dreaming up complex interventions when the best options is usually to let the economy run its course, says Steen Jakobsen.

Swedish bears

A look at the chart for Sweden's benchmark index shows that the the SWE30 is making lower highs and lower lows, and traders should look out below writes Johan Berntorp.

'Remain' strikes back

GBPUSD is on a run as UK bookmakers see the odds of a Remain vote strengthening in the final run-up to the UK's Brexit vote says Saxo's APAC SalesTrading Team.

The surprise decision by RBI governor Raghuram Rajan to leave his post soon, dubbed "Rexit" in India, raises questions about whether he was persuaded to go. Photo: iStock

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