An apparent shift in UK polls over the weekend has the market judging the odds of a Brexit significantly lower this week, which has induced a steep rally/squeeze in sterling pairs that has reversed a significant portion of the losses suffered by sterling in recent weeks.
Other risk‐correlated currencies jumped on the enormous positive shift in risk sentiment, with commodity currencies regaining significant ground and even contending with local highs against the US dollar.
The euro has been caught a bit in the middle, somewhat stronger aginst the US dollar, but with less conviction as the focus is on more traditional risk‐correlated currencies.
Gold has generally been a loser today after previously gaining a significant bid on the spike in Brexit fears prior to this recent relief, though there may be a residual bid if US data continues to worsen and the market starts to mull quantitative easing version four from the Fed rather than the timing of the next hike. A launch of helicopter money from the Bank of Japan may be another issue on precious traders’ minds.
EURUSD came up short just south of 1.1400, the key resistance area ahead of the 1.1500 level and higher. We’ll know the lay of the land post UK‐referendum here, with likely far less upside potential on a Bremain vote than downside potential on a Brexit vote, particularly as the latter has been priced back out again…Read More…