GBP/USD soared another 220 pips to the 1.4580 area this morning.
The latest EU referendum poll in the UK showed that 45% of respondents chose the ‘remain’ camp whereas only 42% chose the ‘Brexit’ option, after the fatal shooting of British MP Jo Cox.
This has proven encouraging news to the market, with both the Nikkei and S&P futures opening higher today. The IMF has warned that a Brexit could lead to economic recession. The Bank of England has also cautioned of risk-averse spill-overs into the global economy.
The entire market is now focused on the UK’s EU referendum result, following the poll this Thursday. Judging by the market reaction over the last two days, more volatility is likely this week. It is expected that a vote to remain would lead to a quick unwinding of risk premium and a substantial risk-on rally, whereas a Brexit vote would have the opposite effect.
GBP and EUR advanced sharply against USD today, resulting in a drop of the dollar index. The dollar index future fell to the 93.75 area this morning.
A weaker dollar has sent crude oil prices higher. The WTI crude oil future rallied around 5% to the $48.40 area. This may lead to a rebound of O&G stocks today. Gold and silver prices, on the other hand, have retraced.
Crude Oil West Texas July 2016
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Margaret Yang Yan