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Pause in the Brexit Campaign Gives Markets Hope

Published June 20, 2016
  • Attention remains fixated upon Thursday's UK referendum, with the polls turning in favour of the Remain vote over the weekend
  • Surveys published in the Mail on Sunday indicated that 45% of participants prefer the UK stay in the EU, while 42% favour leaving
  • As well, betting lines show a 70% chance of a Remain win, up from 65% on Friday according to odds posted on Betfair
  • As might be expected, risk assets are surging as momentum builds behind the Remain camp with equities in Asia and Europe all posting gains of over 3.5% and the US S&P500 opening 1.2% higher
  • Commodities are also coming along for the ride as WTI oil rises 2.3% to $49 a barrel and industrial commodities such as Aluminum and Copper enjoy gains of 0.5% and 1.4% respectively
  • The Canadian dollar is posting its second day of gains after failing to make new lows late last week
  • The Loonie has gained over 2% since Thursday and is now flirting with a move below USDCAD 1.2800 which would be a six day low for the USD
  • The spread between US and Canadian two year government bond yields continues to narrow as the market now only expects one rate hike from the Fed this year, compared with the Fed's own protections for at least two hikes
  • Economic data was light this morning with Canadian Wholesale Trade for April the only release of note
  • Trade rose 0.1% from March, badly missing expectations of a 0.5% increase.
  • However it is a risk-on environment driven by optimism surrounding the prospects for a UK Remain win, and as a result growth currencies such as CAD, AUD and NZD are all getting a boost
  • For more in depth analysis on USDCAD please contact us to request a copy of our weekly newsletter Currency Matters