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‘Risk On’ as UK Referendum Looms
Published June 23, 2016
As today's historic vote on UK membership in the EU begins we are noticing a distinct 'risk on' tone across markets
Equities in Asia rallied led by the Nikkei's 1% advance and European bourses have followed suit with a strong showing across the continent and the UK as all major exchanges are in the green
The USD is falling along with US treasury yields and gold as stocks, commodities and growth currencies are finding a broad based bid
USDCAD touched a 13 day high overnight and Oil is flirting with the $50 level for a second day in a row
Final polling data ahead of today's UK vote pointed to a virtual tie between the Leave and Remain camps and thus voter turnout for both sides will be crucial – the weather isn't cooperating at present and is affecting areas with a stronghold of Remain supporters, so this could come right down to the wire…
The implications of a Remain win would likely be good for CAD and risk, although the extent of further gains given the recent rally may be limited
While a win for the Leave vote would likely be devastating – confusion would reign as UK law makers would have to scramble to figure how to ratify an exit from the 28 member union of trading partners causing widespread flight to safety into the US dollar and away from the GBP, EUR, stocks, commodities and related currencies such as CAD
For now we are enjoying the risk-on trade ahead of the close of polls at 5pm EDT time and are noticing a rather strong move in USDCAD as it trades in the low 1.2700's for a 0.9% loss
These are best levels for US dollar buyers in over two weeks – it may be a good time for Canadian importers to take a look at their upcoming exposures and take some action if they have underlying needs
Oil continues to flirt with the key psychological level of $50 a barrel for crude and is up just over 1.4% to $49.82 thus far this morning
Today's economic data from the US has been strong thus far with Jobless Claims for last week coming in significantly better than expectations at 259k compared with 271k forecast
Up next is a first look at Markit PMI Manufacturing data for June and New Home Sales data for May at 10am EST
USDCAD Chart: USDCAD under pressure below its 21 DMA (white).