Pound Sterling (GBP)
In the early stages of Monday’s European session the Pound surged versus all sixteen of its most actively traded peers. The appreciation was in reaction to EU referendum opinion polls over the weekend that showed ‘Remain’ had regained the lead. Most analysts expect significant Sterling volatility over coming days, however, with traders so reactionary to any developments. Any sign that the ‘Leave’ campaign is gaining momentum will likely result in a complete reversal of today’s Sterling gains. The Pound may also decline as the day progresses if traders take advantage of attractive selling opportunities.
One of the major implications of Brexit uncertainty has been sustained periods of risk-off trading. This caused many traders to flock to safe-haven assets, such as developed nations’ bonds. As a result, yields from 10-year German Bunds turned negative last week for the first time. This significantly limited available assets for the European Central Bank (ECB) to purchase, with many economists predicting that the ECB’s asset-purchase programme will not have the desired impact. As a result, the Euro softened considerably. However, on Monday the reduced demand for safe-haven assets saw bond prices fall and yields improve. This caused the single currency to edge higher versus a number of its major peers.
US Dollar (USD)
Such has been the impact of EU referendum uncertainty, safe-haven demand last week saw the US Dollar soar versus its peers irrespective of disappointing ecostats. Following the most recent Federal Reserve interest rate decision, Chairwoman Janet Yellen delivered a dovish speech. Inflation and labour market conditions also failed to meet with expectations. On Monday the US Dollar declined, however, as traders flocked to high-yielding assets. With an absence of significant domestic data to provoke changes, the US Dollar is likely to hold losses for the remainder of Monday’s trade. With that said, however, any developments with the EU referendum debate could see sentiment shift once again.
Australian Dollar (AUD)
With global equity markets advancing, commodity prices improving and reduced odds of a Brexit, demand for high-yielding assets caused the Australian Dollar to strengthen versus a number of its major competitors. With a complete absence of domestic data to cause changes, the ‘Aussie’ (AUD) is likely to hold gains unless there is a significant change in risk-appetite.
New Zealand Dollar (NZD)
Much like its Oceanic counterpart, the New Zealand Dollar advanced versus the majority of its currency rivals thanks to risk-on trade. Comparatively disappointing results from domestic data, which saw second-quarter Consumer Confidence and May’s Performance of Services Index decline from previous figures, wasn’t enough to offset ‘Kiwi’ (NZD) gains.
Canadian Dollar (CAD)
Although crude oil prices have risen, the Canadian Dollar has seen a mixed faring versus its major peers. The ‘Loonie’ (CAD) made steady gains versus safe-haven assets, but softened against higher-yielding currencies.