The trend underpins growing investor sentiments that British voters are likely to vote for Britain staying within the EU.
With opinion polls showing British voters swinging to opt to remain within the safe confines of the European Union in the coming referendum, the sterling is seeing a rally today, which only underpins the risk sentiments. In contrast, the yen which was earlier perceived as a safe haven has seen downward momentum.
The pound has climbed nearly 1.6% to $1.4589 which extends its recovery from last week. For the last two months, it was moving horizontally in a trough of $1.4013.
Last Thursday, underpinning the hopes of Britain staying within the EU, it jumped by more than 2% to 152.65 yen pulling well away from its three-year trough of 145.34.
With six opinion polls predicting that voters will want to keep Britain within the European Union, although the June 23 vote, can still be a close call, investors rallied.
“The poll findings will resonate today, likely seeing further advances for sterling, some renewed weakening in the yen and a firmer Australian dollar,” said Ray Attrill, global co-head of FX strategy at National Australia Bank.
Even before the announcement of the results of the poll, according to data from the Commodity Futures Trading Commission released, which was released last Friday, speculators had reduced their net short positions against sterling last week, which saw it rise to its three year high.
The upward swing is indicative of a general rise in the risk-apetite, shares in the U.S. stock futures ESc1 too, rose more than 1%, which could possibly mean that Wall Street will open with positive position later today.
As a result of these currency fluctuations, the yen tumbled across the board, which could be a good sign as the currencies reduced strength will only go to help ease investor concerns.
In fact, last Friday, Japanese Finance Minister, Taro Aso had said that he was deeply concerned about the “one-sided, rapid and speculative” movements the yen had seen and the finance ministry will respond urgently if its required. This only went to hint at the possibility of the Japanese Finance ministry selling yen to intervene its upward trajectory in the market.
Brexit Tipping point
The tipping point for all of these movements was last week’s murder of Jo Cox, a pro-European Union lawmaker who had made considerable efforts so that Britain remains within the safe confines of the European Union.
“Jo Cox’s death might have been some kind of a game-changer, but maybe not. I think speculators will continue, selling the pound and buying yen, based on polls. This is a just a rebound today, and not based on any fundamentals,” said an investor.
Looming on all of these upward movement is Germany’s constitutional court which is set to rule tomorrow on the emergency bond-buying scheme devised by the ECB in case British voters were to vote for Brexit, and thus create a financial crisis.
Although it is unlikely that Germany’s top court will outright reject the ECB’s plans as the European Court of Justice had largely favoured a similar verdict last year, the court could however potentially disbalance the ECB’s money-printing scheme, which in turn could whip the markets into a turmoil.
Incidentally, it’s to be noted that Janet Yellen, the Federal Reserve Chair, will appear before U.S. lawmakers in the U.S. House of Representatives later, this this week on Wednesday, to discuss the state of the U.S economy and its monetary policy.
Categories: Economy & Finance, Geopolitics, Strategy
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