High Low     High Low
EUR/USD 1.1416 1.1354   USD/ZAR 14.88 14.71
GBP/USD 1.4528 1.4447 GBP/ZAR 21.53 21.32
EUR/GBP 0.7879 0.7844 USD/RUB 64.27 63.16
GBP/EUR 1.2749 1.2692 USD/ILS 3.8506 3.8278
USD/JPY 107.10 106.25 S&P 500 2119 2109
GBP/CHF 1.3936 1.3861 Oil (Brent) 53.02 52.22
GBP/AUD 1.9469 1.9330 Gold 1266.0 1257.0

China’s recent data shows exports remain weak while imports improved. Bottom line, China’s trade performance continues to suggest uncertainty regarding external growth (exports) but on the flip side improved domestic demand (imports).

This latest data does not help the FED with their rate decision given the poor data in China, UK referendum uncertainty and of course poor US data (NFP last week +38k only). The June rate hike as per her comments is “likely” to be off the table with all eyes now on July meeting (27th). As I mentioned previously, the FED will be “hoping” for a rebound in US data, the UK remaining in the EU and China’s data improving on all fronts. Only then will they be in a position to confirm one way or another that the US economy is ready for another rate hike. As things stand and as per Yellen’s comments on Friday last week, we down to FED hikes (potentially) in July and December. Continued poor data in the US and China coupled with the UK leaving the EU will send the FED into a spin leaving them unable to raise rates at all in 2016. And that is excluding a potential win for Mr Trump in November US elections. Not since the Greek drama a few years back has the financial markets been gripped with so many simultaneous “event risks”. As far as FX (and other underlings) traders are concerned this is like mana from heaven – volatility. Traders love to be able to trade not only their “gamma” (long FX options) but also trade the event risk. Exciting times ahead in 2016.

Today has opened as a bad day for the GBP. Trading above 1.45 at the open we now find ourselves 0.50% weaker at 1.4450 as sellers > buyers. Today 2 weeks, the heat will be on as we go to the polls to vote STAY or GO.

Some good news overnight, a prominent Tory Dr Sarah Wollaston has announced she is defecting from the LEAVE camp to the REMAIN camp. Her decision she says, was based purely on the likely damage a LEAVE win will have on the NHS. Dr Sarah disputed Boris and Grove’s comments that LEAVING will unlock a £350m windfall (per week) for the NHS. She quite simply stated this “simply isn’t true”. “For someone like me who has long campaigned for open and honest data in public life I could not have set foot on a battle bus that has at the heart of its campaign a figure that I know to be untrue” said Wollaston. “If you’re in a position where you can’t hand out a Vote Leave leaflet, you can’t be campaigning for that organisation”. She continued, “I realised I would feel a sense of loss, that we had lost something, and I am now actually going to vote to remain” she said. Wollaston said she thought there would be a “Brexit penalty” for the NHS because leaving the EU would hit Britain’s economy. “The consensus now is there would be a huge economic shock if we voted to leave” she said. “Undoubtedly, the thing that’s most going to influence the financial health of the NHS is the background economy. So I think there would be a Brexit penalty”.

On the flip side, a letter from the chairman of JCB, alleges he told JCB’s employees why he was endorsing a Brexit. “I believe that JCB and the UK can prosper just as much outside of the EU, so there is very little to fear if we do choose to leave,” Lord Bamford said. Lord Bamford, while I fully respect you as a businessman and head of a super company, your life is spent at your house in Barbados (and I should say it is one very nice house), and therefore the people that work for you are the ones who will suffer the fallout from a BREXIT vote. Additionally (and I do not know the inner workings of JCB) how will your clients view your company if the UK voted to leave. Will they still want to buy your equipment, as many people have noted there will be a severe backlash financially and economically against the UK (by the EU, US and others) in response to the exit from the EU.

In my heart of hearts I truly think that despite the polls putting the LEAVE camp ahead, people will “come to their senses” on the day and vote STAY/REMAIN. Honestly, I think people will be scared at the outcome of a BREXIT vote and how this will negatively impact their lives and those of their kids. Just like the Scottish referendum, the Scots decided it was better to remain IN the UK than go it alone. How right they were given where oil has dropped to. Talking about Scotland, PM Cameron announced yesterday a BREXIT vote will in all likelihood lead to another Scottish referendum which I shudder to think of. Decisions decisions, let’s hope people decide what’s right and proper rather than what “might” be better as an outsider.

Long live FX volatility



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