Morning Briefing – sterling on crest of a ‘risk’ wave

<p>Sterling continues to demonstrate the meaning of real volatility this morning.</p>

Updated at 1222 pm BST to correct details of Guardian debate and add Sky News TV Debate

 

  • Sterling continues to demonstrate the meaning of real volatility this morning with a vast overshoot on the upside of as much as 2.1%; its second biggest upswing since a 2.4% bound on 15th December 2008. Traders had been betting on a revived marginal poll lead for Remain coming through, even before results of surveys done before Thursday’s tragic events were available. Well, the wager was correct, but no one believes prospects for Thursday’s vote are any more certain.
  • The fact is, soundings from voters taken after the chilling shock from the murder of pro-Remain MP Jo Cox, are barely a trickle so far. Furthermore, YouGov itself downplayed the impact of Thursday’s events on its poll—conducted on that day and the day after and published on Saturday—which gave a 44%/43% split for Remain. Renewed worries about economic consequences were a likelier explanation of the tick-back from Brexit, YouGov said. YouGov also released another poll on Saturday from responses on Wednesday and Thursday revealing the erosion of ‘Leave’s’ lead, Survation gave Remain a 3 point lead with theirs on the same day and Opinium’s was a dead heat of 44% each.
  • Cadging the best maths from the banks, hedge funds and others with fortunes riding on Thursday’s result, we continue to see that there’s no statistical significance in the edge regained by the ‘Remain’ campaign, though of course probabilities could firm up in as little as 24 hours. In the meantime, the risk that the market’s best guess could turn out to be wrong remains very real indeed.
  • For now though, stocks have surged on a wave of risk seeking across the globe, whilst safe havens have ebbed sharply. FTSE’s European equities index, +3%, the battered bank sector +4%, FTSE 100 +2.4%, DAX +2.9%. Across Asia most markets were also boosted, led by Japan, up 2.4%; whilst Wall St. is getting ready to follow, judging by the futures.

 

Major currency pairs and crosses at last check:

  • EUR/GBP             -              0.77735 -1.6%    (1-week low today of 0.7731)
  • GBP/USD             -              1.4664   +2.1%    (1-month high today at 1.4671)
  • USD/JPY              -              104.60 +0.44%   (1.week high today of 104.84)
  • GBP/JPY              -              153         +3.79% (1-week high today at 153.50)

 

  • There is a world outside of the UK and the EU. But for the moment its influence on markets will be nowhere near as strong as the ebb and flow of news and information surrounding Britain’s EU referendum. Attention will be fixated on the next major TV debate tonight, on Sky News from 6pm, London Time. The Labour leader, Jeremy Corbyn will make his only live appearance of the campaign, with just half an hour set aside for questions from the studio audience in west London.
  • The Guardian newspaper will host a debate on the same night. The heaviest hitters present will be Shadow Chancellor John McDonnell, Shadow Home Secretary Andy Burnham and SDP founder Lord David Owen. The next poll in the spotlight is one by Ipsos Mori scheduled for Tuesday.

 

Please look out for our updates on the above market developments and others throughout the day.

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