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Brexit off, risk on

Posted on: June 20, 2016

Risk rallies after the latest UK referendum polls on the weekend show “remain” camp in the lead after “leave” camp in the lead last week. Betting markets now shows a 75% chance of Remain win. GBPUSD rallied from the close of 1.4358 on Friday to hit a high of 1.4673 in London trading, a 300bp+ move! This is one of the largest one-day move for GBPUSD since the financial crisis in ’09. This really shows both the nervousness of the traders and the illiquidity of the market to cause such a big move.

With the turn in the UK referendum polls toward a Remain lead, risk sentiment turns bullish. Equity markets jumped sharply with EuroStoxx up 3%, the FTSE100 up 2.6% and the Nikkei closed up 2.3%. CAD and oil also benefitting from risk-on sentiment with USDCAD trading in the low 1.2800 area and WTI trading above $49.

Nothing else matters except for the UK referendum this Thursday and all G10 currencies are being dragged around by moves in the UK Brexit polls. Given the market risk sentiment reversing on a dime depending the results on the UK referendum poll and the thin liquidity in the markets. My suggestion would be to stay out of the market until next week or stay very nimble.

Good luck trading!

  • Previous Day’s NA Range 1.2830- 1.2916
  • Asia overnight range 1.2832 – 1.2861
  • London overnight range 1.2805 - 1.2850

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