The new trading week has kicked off with a big relief rally as capital gushes out of defensive havens and back into risk markets, particularly stocks. The Nikkei and hang Seng led off with 2.3% and 1.7% gains respectively but momentum has really picked up in Europe where the FTSE is up 2.8% and the Dax up 3.4%. US index futures are also on the move upward today with Dow and S&P futures trading up 1.1% and 1.3% respectively. Two main factors are driving this big shift in sentiment. First is the swing in Brexit poll momentum which has given Remain a slight lead following the assassination of pro-remain MP Jo Cox last week. Second is follow through reaction to Friday’s comments from St. Louis Fed President Bullard who shifted from hawkish to ultra-dovish changing his call on interest rates from 2 hikes this year to 1 over the next two and a half years. USD is trading lower for a second straight day off this news as traders continue to alter their interest rate expectations. In addition to the gains made by stocks, Brent and WTI crude are up 1.3% and 1.1% today. RUB is up over 1% in tandem while CAD and NOK are up 0.2%. Nigeria’s currency has apparently dropped after going to a free float today. Gold is down 1.3% while GBP is the top performing currency for a third straight day gaining 1.0% to 1.1% on USD, JPY and 1.1% on EUR. What remains to be seen, however, is if this is a dead cat bounce or the start of a lasting trend. For now the bulls have the run of the roost, but there is still the potential for a lot of volatility in both directions this week. First of all, take a look at USDJPY which remains under 105.00 last week’s breakdown point. The Yen has not participated today’s selloff of defensive plays expect against the pound which suggests some traders remain sceptical. Second, take a look at EUR, which is trading flat to down against most other majors even though one would think a decision to remain would be good for the EU too. This shows that traders recognize that a close win by Remain is not necessarily a ringing endorsement and that the EU’s battles may just shift elsewhere. The EU currently reminds me of the old cartoons where the character rushes around to plug a hole in a dyke only to then see five more leaks spring up. Over the weekend, the Italy’s Euroskeptic Five Star movement won mayoral elections in Rome and Turin while election polls in Spain indicate the coalition led by Podemos a Euroskeptic party could get close to a majority. Third, once the liquidity rally washes though traders may recognize that Bullard cutting his GDP forecast and indicating he expects slow growth for years to come may raise questions about the health of the US economy and the outlook for corporate earnings. This suggests that the US rally may be on shaky ground. We may get a better idea of how the Fed is leaning from Chair Yellen’s testimony to Congress this week. Finally, Cable has run up from the low end toward the high end of its $1.4000 to $1.4700 trading range in less than three trading days swinging expectation from a Leave win to a Remain win. Even with the big swing to remain over the weekend the polls are still showing a very close race right to the wire. This means that we could still see big swings in both directions so it’s important for traders this week to fight off complacency and be prepared to take advantage of opportunities as they present themselves. Corporate News There have been no major corporate announcements this morning Economic News Significant announcements released overnight include: Weekend Brexit polls include: Survation 45% Remain, 42% Leave YouGov 44% Remain, 43% Leave UK Rightmove house prices 5.5% vs previous 7.8% Germany producer prices (2.7%) vs street (2.9%) Upcoming significant economic announcements include: (Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore) There are no major announcements scheduled for North America today CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.