All the price action seen during the Asia session has been indicative of markets hunkering down and reducing risk. The yen is gearing up for an attack of the year’s 105.55 low on USDJPY, whilst sterling has continued the weaker tone of Friday, pushing down below the 1.42 level on cable as the Brexit vote moves ever nearer. Meanwhile, the German 10 year bond moves ever closer to the zero level, with many fingers poised over pre-prepared headlines for when it eventually happens. Gold has continued to move higher with only one (marginal) down day over the previous 6 sessions. Spot gold is currently 1.6% away from the high of the year just above the 1300 level. This is not just about the EU referendum next week, but it’s certainly a factor in dampening activity and causing investors to hold back on risk positive trades.
There are lots of central bank meetings this week, but it’s looking ever more naive to expect them to be able to lift the tone in markets. The Fed meeting be a case of parsing the statement for marginal changes in tone, with more interest falling on the BoJ decision Thursday. Given the ever more unconventional nature of policies coming from central banks in general and the BoJ in particular, it’s difficult to envisage just what will be next. This week seems less likely for fresh policy action, not least given the prevailing uncertainties around Brexit which could change the yen outlook in less than 2 weeks.