Market Drivers June 7, 2016
RBA leaves rates on hold
Cable spikes 100+ points Remain regains lead
Nikkei 0.58% Dax 1.85%
Oil $49/bbl
Gold $1243/oz.
Europe and Asia:
AUD RBA rate on hold 1.75%
EUR GE IP 0.8% vs. 0.7%
EUR GDP 0.6% vs. 0.5%
North America:
USD Non Farm Productivity 8:30
CAD Ivey PMI 10:00
It been another night of unsettled trade in cable in Asian session dealing with the pair spiking nearly 200 points on a matter of seconds on what many traders believed was a fat finger trade during low liquidity time.
The latest YouGov polling has given the Remain vote a narrow lead and the Betfair website has placed the implied probability of UK staying in the union at 72%. The news stood in stark contrast to a series of polls at the start of the week that suggested the Leave campaign was gaining momentum.
The spike in volatility in cable – which is now essentially trading on Brexit polls and nothing else – has risen to its highest level since 2007 and is likely to remain elevated until the referendum is taken on June 23rd. With the general public essentially evenly split on the issue while 17% of the population remains undecided there is almost no way to handicap the results with any degree of confidence which leaves trading the pair a very treacherous process for the next few weeks.
Elsewhere, in Australia the Aussie received a boost from RBA when the central bank announced that it will stay pat on rates keeping the benchmark rate at 1.75% for the time being. Although the market expected no action from the RBA, the statement was read as slightly hawkish with the central bank noting that housing prices have started to rise while commodity prices have firmed.
The tone of the statement, along with the fact that RBA Deputy Governor Lowe will not assume governing duties until September has led the market to conclude that Aussie’s 1.75% yield will remain in place through the summer at least and the pair rallied up to 7450 level before finally succumbing to some profit taking. With Aussie on some firmer footing now and the Fed stationary until July at very earliest, the pair is now likely to target the 7500 level as the week progresses.
In North American session the calendar is light with only non farm productivity on the docket, but price action could remain volatile. The dollar arrested its slide yesterday and has even gained on the yen in the wake of yesterday’s remark by Ms. Yellen who left open the possibility of a hike over the near term horizon. Therefore today could see some good two way action with longs trying to push USD/JPY through the 108.00 figure while the battle in EUR/USD at the 1.1300-1.1400 range continues.
Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.
Editors’ Picks
EUR/USD steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.
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