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Simon Smith

Welcome to Brexit

There are many, many implications of the events overnight; for markets, for politics and for the wider global geo-political scene. Some will become apparent in the coming days, others will take years. For markets, sterling has already passed judgement, trading a 17 big figure range overnight as we’ve moved from believing the last polls showing a small lead for ‘remain’ to the eventual results. The immediate concern is with FX intervention, not from the UK but from Japan or Switzerland who have ...

Simon Smith

Judgement Day

The one thing that is guaranteed overnight tonight is volatility, as the UK vote on EU membership has finally arrived. Polling stations close at 22:00 local time, with results then being counted across the 382 counting areas. The final result will be announced at the start of the European session tomorrow, but may become clear earlier should the results show a comfortable margin for one side or the other. The market is priced towards the UK remaining in the EU, but not fully. Should we see this ...

Simon Smith

The end game approaches

Markets appear to be free-wheeling into the end of the week as they await the results of the UK’s EU referendum results on Thursday. The issue came up again at Yellen’s testimony on the economy yesterday, with the message largely unchanged from that delivered in the wake of the FOMC meeting last week. So we’re at a stage where policy-makers globally appear to be stalled ahead of the results. Sterling has been steadier after Monday’s surge, with the 1.47 level appearing to be the short-term ...

Simon Smith

It’s all about Brexit

There was no escaping the size of the sterling surge yesterday, with cable seeing the biggest 1-day move since mid-December 2008. The rally was built on a growing belief that the UK referendum on EU membership is going to be a lot closer than was believed last week. The correction higher was also seen on equities and also other risk asset that have been under pressure over the past week or more as investors have retreated. EURCHF saw its biggest one day up-move since early March of this year. ...

Simon Smith

Positive but Nervous

By the end of this week, a great deal of uncertainty will have been removed from markets (UK markets in particular), with the UK referendum on EU membership over and done with. Weekend polls have removed the lead of the ‘leave’ camp, with the FT’s poll of polls now putting both sides level on 44% each (12% still undecided). Sterling has surged during Asia trade, up by more than 1.5% into the European open, having briefly touched the 1.46 level on sterling. Given the level of those who say they ...

Simon Smith

Pausing to Reflect

After the tragic events in the UK yesterday, there was a dramatic change in tone in the political environment with one week to go before the EU referendum. This was also reflected in markets, with campaigning on both sides having been suspended for the coming days. It’s a pause for reflection on what was a relentless push towards shedding risk in markets over the past week. For now, this has resulted in a sharp reversal in sterling, less so in other risk correlated assets such as the yen and ...

Simon Smith

Helpless Central Banks

From being the masters of markets in recent year, central banks are increasingly looking like the backroom boy; helpless against the uncertainties of the world. Once again, the world of BoJ Governor Kuroda involves him doing nothing and the yen rallying more than 2%. It also involves him doing something (as was the case end January) and the yen rallying. But the BoJ’s hands were largely tied, given that a fair degree of the latest strength has come from the risk aversion spreading through ...

Simon Smith

Central Banks Holding Back

There is only one direction in markets at present and that’s avoiding risk at nearly all costs. The fall below zero on the 10 year German government bond yield yesterday was the latest manifestation of this, but it can be seen pretty much everywhere. Next week’s EU referendum vote in the UK is the primary reason for this and between now and then, there’s unlikely to be any escape from its grip. Investors are unwilling to take on positions that are likely to be negative effected by the UK’s ...

Simon Smith

Shifting Brexit Momentum

The latest polls ahead of the UK EU referendum have given a more convincing lead to the ‘leave’ camp, which has weighed more heavily on sterling during Asia trade. The Sun newspaper, the most read in the country, has also come out on the side of ‘leave’, providing further momentum to the campaign. Cable has pushed down to the 1.4150 level once again (briefly touched yesterday), whilst EURGBP is gearing up for a test of the 0.80 level. UK stocks are opening lower, although for now broadly line ...