A sense of unease gripped the global markets during trading this week, with anxiety reaching new heights as Brexit jitters triggered a wave of risk aversion consequently souring investor risk appetite.
Most major currencies and safe-havens have violently oscillated between losses and gains as market participants offload and reload positions in a bid to be on the right side of the wining trade.
Although global stocks displayed an incredible rebound during trading on Monday following the unexpected lead in the “Bremain” camp, which bolstered expectations of a “Bremain” victory, the mounting uncertainty could ensure prices remain capped until results day.
In Asia, most equities displayed resilience, with the Nikkei trading +1.28% as a combination of “Bremain” optimism and yen weakness provided a foundation for short-term bulls to attack.
While it may be likely that Europe and America follow a positive path from the inflated “Bremain” expectations, most major markets could be poised to decline when the elevated concerns over the global economy, growing uncertainty and sporadic oil prices encourage investors to scatter away from riskier assets.
Sterling volatility unchained
Sterling bulls were imbued with inspiration during trading on Monday, with the GBP/USD surging to three-week highs above 1.4700 following the latest poll from YouGov that displayed a narrow 44% lead in the “Bremain” camp.
The pound has been flung onto a wild roller coaster ride as the sharp changing polls coupled with uncertainty continues to create explosive levels of volatility, which have made the currency highly unpredictable. With just over two days left until the heavily anticipated E.U referendum vote on the 23rd of June, volatility and uncertainty may be set to rise to unforeseen levels, and this could haunt investor attraction towards the pound further.
While it remains uncertain which camp will be victorious, it is becoming quite certain that the Brexit fears have had a negative grip on the UK, Europe and global economy. A potential Brexit may have the ability to not only punish the sterling but the euro, as fears mount over other countries leaving the EU.
The GBP/USD surged with force during trading on Monday, with prices printing fresh three-week highs above 1.4700. If bulls can break above 1.4750, then the gates could be open for a further incline towards 1.4850.
Mario Draghi in focus
Investors may direct some attention towards ECB president Mario Draghi, who is due to testify before the European Parliament’s Economic and Monetary Affairs Committee in Brussels.
For an extended period, the Eurozone has been engaged in a losing battle with faltering inflation levels, while GDP growth has followed a static trajectory. The ECB remains under pressure to jumpstart economic growth, and the mounting Brexit developments have placed the central bank even under more pressure to act swiftly.
With fears that a Brexit could promote instability within the Eurozone, the European economy is currently exposed to a major downside risk, and this could ripple across the global markets. While it may be likely that Mario Draghi reiterates his dovish mantra in an effort to talk down the euro further, the central bank could be on standby for the outcome of the EU vote this week.
Gold struggles around $1285
Gold prices rallied above $1285 during trading on Monday, as the growing uncertainty ahead of the EU referendum vote encouraged bullish investors to install a round of buying towards $1290.
It seems that gold prices have been gripped by growing Brexit expectations, and when speculation mounts of a potential Brexit, the yellow metal regains its safe-haven allure, consequently providing a foundation for bulls to pounce. With just over two days left until the EU referendum vote, uncertainty and anxiety should skyrocket, and this could propel gold prices higher.
From a technical standpoint, prices are trading above the daily 20 SMA while the MACD trades to the upside. If bulls can defend above $1285 then gold could rise towards $1300 and potentially higher.
Commodity spotlight – WTI oil
WTI oil prices experienced an incredible rebound during trading last week as a combination of dollar weakness and profit taking encouraged bullish investors to install a heavy round of buying.
With uncertainty mounting ahead of the Brexit vote on the 23rd of June, oil prices could trade in a haphazard fashion as risk aversion leaves most market participants on edge. With the oversupply concerns still lingering in the background, prices could be poised to trade lower as bearish investors install another round of selling.
From a technical standpoint, the candlesticks are trading below the daily 20 SMA while the MACD is in the process of crossing to the downside. A breakdown back below 47.00 may offer bears an opportunity to attack prices back towards $46.00.
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