Tuesday, June 21: Five Things the markets speak of
current market sentiment remains highly correlated to speculation Brexit . Global stock markets are relatively mixed in the overnight session; a day after a major risk rally was supported by U.K. weekend polls the referendum.
Earlier this morning, Sterling (£ 1.4784) rallied to a new seven-month high, on the perception of risk reduction that Thursday UK referendum will mean a vote to leave the E .U.
Two opinion polls during the night to "stay" to "leave", although a YouGov poll still "leave" in the face.
ORB / Telegraph saw the construction of the camp dynamic "living" with a + 53% to stay, 46% for 'leave' ventilation against + 48% to stay, 49% leave last week. YouGov poll :. + 42% to stay, 44% for holidays - two points ahead for 'leave' vs. before seven points ahead
Indeed, polls are very close, leaving the book and the markets vulnerable to opinion polls putting "leave" before. Price movements between the different asset classes can sometimes be volatile due to a lack of liquidity that most investors remain apart before the referendum.
1. Dollar index remains vulnerable
For many investors wary of Brexit-the powerful "buck" has been the refuge of choice. This choice helped support the dollar on some fundamental weaknesses in recent weeks.
However, if the chances of a departure from the United Kingdom of É.U really begin to fall, the fundamental flaws of the dollar may become even more exposed.
Already this month, the lowest in May U.S. jobs data dashed hopes rate hike, and the Fed funds futures show a likelihood of an increase of 12% in July. Without expectations of tighter monetary policy in the short term or U.S rush shelters, there is less reason for investors to own the dollar.
The US Dollar Index is down 0.7% at 93.55, and if shelters flows continue to decline, the index risk a return to low last months of the order of 92 .
2. US Treasury yields
the result of the referendum in the UK will decide the path of global government yields bondholders. There is a potential for potentially dry low yields new records in the case of a Brexit.
Treasury yields (10'S + 1.67% - last weeks low + 1.505%) should remain volatile before Thursday's vote. If the camp will prevail, it is expected that most of the recent leak of owning sovereign bonds relax even more to + 1.80 to 85% for the 10 year product. Expect yields to be capped due to the strong appetite overseas for higher returns.
In the case of a vote Brexit, U.S. 10-year yields have the potential to fall to new record lows around + 1.35%. It U.K. counterpart; 10-year gilts could fall to 1%, while the equivalent Bund could be traded in negative territory.
3. EEC currencies to gain on 'Bremain
collective thinking sees the Central European currencies recover losses the past outright week in EUR if the UK votes to stay in the É.U in Thursday's vote.
The Polish zloty (PLN) has the greatest potential to appreciate in the direction of € 4.3000 against the euro, while the Czech koruna (CZK) has hardly given the floor their central banks for EUR / CZK.
Currently, CZK moves in a narrow sheer range due to the intervening Czech National Bank to maintain a 27.00 floor, leaving less vulnerable to following sharp movements of the UK referendum.
in the case of Brexit, central banks in Croatia, Romania and Serbia should intervene to reduce currency volatility. Both the central Hungarian bank (MNP) and the National Bank of Poland should only take action in case of excessive market turbulence.
4. Yellen testimony before the Senate Banking Committee
Later that morning, the Fed Yellen appears before the Senate banking Committee in his testimony semi-annual monetary policy (10 am EDT) and tomorrow the Fed Chairman will return to the hill for the second round before the House Financial services Committee.
Wait Yellen to face a grilling on a range of issues - the economic effects of bank regulation, cyber-security and the development of the Fed on global developments in monetary policy the United States.
The Fed chief should repeat the comments she made at the press conference of the FOMC last week. Nevertheless, expect it to be pressed to explain the reversal of the officials thought it a month ago.
How U.S. officials have-go 'involving a potential rate increase to a result "very uncertain" so quickly? Last week, the Fed said global concerns (vote Brexit) as a factor not to raise rates. This one came to Yellen's press conference and not in accompanying the Fed's policy statement.
5. German court rejects a legal challenge to the purchase of bonds by the ECB
Earlier this morning, highest court in Germany ruled that the purchase program unlimited obligations (TMO), created by the ECB is in accordance with German law. This is a massive victory for Draghi ECB president on its most vocal critics of German. Note, this is not the last legal challenge; there are four other German proceedings still pending.
The program was installed in the weeks Draghi's commitment to do "whatever it takes" (September 2012) to save the euro. The program was never used, but the possibility of funds to buy bonds of peripheral euro zone has always been credited to restore investor confidence in the euro.
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