The sterling recovery continues. EUR/GBP hovers near yesterday’s lows, even as GBP/USD hovers near yesterday’s highs. Volatility still remains at levels which can be considered elevated relative to recent history. With the referendum next Thursday we’re likely to continue to experience surges in either direction. While no one can predict how things will go, I can’t help but think that there will be a sufficient number of voters who before they make their imprint on the ballot box will ask.. “Why?”. I don’t get it, but then I’m not a voter in this referendum. I don’t need to get it! But if enough people ask the question, and as I suspect, fail, to come up with a good enough answer, we should see a decisive swing towards No on polling day. Just my gut feeling. The obvious implication for sterling will be an even stronger recovery. I would expect this to be more pronounced against the euro than the dollar.


Equities have been in a corrective pattern for the last week, as the bulls pause to catch their breath. We’ve seen this all before, and to my mind the only question we need ask, is where the appropriate buy zone is? Nothing has happened, no new information has been discovered to alter the current paradigm, so the trend will persist. We live in a world that is moving, at least in economic terms, back towards normalcy, and few things confirm this more than the recent decline in gold. There is less need for safety or a store of value in this recovering narrative, and gold will always pay the penalty in such an environment. Clearly we can’t ignore the impact of a stronger dollar on gold, it cannot be denied this has also been a significant factor in the recent weakening of the gold price.


Continuing with the dollar, while both the euro and sterling have been able to hold their own versus the green back in the last few days, the same cannot be said for emerging market currencies and indeed other g10 currencies. USD/JPY has made new highs every day this week, and AUD/USD has made new lows. Studying a selection of emerging market currencies, the move has been less aggressive, but generally the dollar has been strong. The sheer power of the dollars move, and the breadth of the move cannot be dismissed. This is usually indicative of a major trend. I would be amazed if in a decade from now we don’t observe the dollar at even stronger levels relative to most currencies than we see at the moment.


Some significant macro data coming out today. In the Eurozone we see employment growth and industrial production numbers, and in the US we see retail sales and University of Michigan sentiment indicators.