A new optimistic tone has really taken hold in markets at the beginning of the final week before the Brexit referendum. Risky assets, notably stocks, oil and the British pound have surged whilst haven positions in gold and the Japanese yen have been liquidated. The abrupt change in sentiment has caught many off guard. Sudden swings in and out of downside protection in Sterling ahead of the vote are adding to volatility.

A poll from Survation over the weekend showing a lead for the Remain side has prompted a perception that the Brexit tide has turned. The concept of momentum, which plays an important part in financial markets can also effect public opinion. Research has shown that some proportion of undecided voters will vote for who they think is the likely winner. The polls in of themselves can influence the final result.

A number of FTSE 100 bosses, car manufacturers as well as the English Premier League all coming out in favour of the EU adds support to the economic case to Remain.

The bias in the city has generally been that a Remain vote is more likely, but polls pointing otherwise meant that assertion needed to be hedged. The unusually large jump in Sterling on Monday is in part, those hedges being unwound.

It’s important not to get Brexit tunnel vision. Central banks still matter. A very dovish shift from the Federal Reserve’s James Bullard, who on Friday said the Fed may only raise rates once before 2018 has contributed to a drop in the US dollar, adding to Sterling strength. Fed Chair Janet Yellen testifies on monetary policy before the Senate Banking Committee on Tuesday.

The FTSE 100 has surged over 2.5% led by banking and financial shares, with shares of Royal Bank of Scotland jumping 8.5% following the news it will delay the spin-off of Williams and Glyn.

Stocks in the US look set for a massive leap higher on the open with the Dow Jones set to gain triple digits, tracking the recovery in Asian and European markets.

USA pre-opening levels

S&P 500: 22 points higher at 2,093

Dow Jones: 176 points higher at 17,853

Nasdaq 100: 47 points higher at 4,421


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