Financial market research and analysis

This week’s early enthusiasm in the UK markets appears to have eased this morning. The FTSE 100 is paring gains after having surpassed the 50, 100, 200-day moving averages on hopes that the UK would vote to remain in the EU. Although the latest Brexit polls were in favour of the ‘Remain camp’, not much has changed fundamentally regarding the Brexit probabilities. At this stage, the market remains heavily hedged against Brexit risks, while pricing in a ‘no exit’ as the base case scenario.

The FTSE stocks are fragile at the open as a reminder that investors may have gone well beyond themselves just a couple of days before the Brexit referendum.

Miners are leading losses in London.

Anglo American (-3.29%)
Rio Tinto (-2.08%)
Antofagasta (-1.68%)
Glencore (-1.09%)

The GBPUSD extended gains to 1.4726 in Asia as the positive momentum attracted buyers hesitating to enter a fresh long position since the pair hit 1.4013 on June 16th. The pair traded above its 200-day moving average (1.4683) for the first time in more than a year. The unexpected 370 pips rally could encourage tactical sellers on the run up to the Brexit referendum due on June 23rd. In this context, we could see a pullback toward the 1.4500/1.4455 (100-day moving average). Large call expiry at 1.4450 is ready to give some support later in the session.

The EURGBP found support at the 0.7684, the major 38.2% retracement on Nov’15 – Apr’16 surge. Technically, the pair stepped in the bearish consolidation zone. Decent put options trail below the 0.7665/0.7650 for today’s expiry. Clearing the 0.7684 could therefore encourage a further slide toward the 200-day moving average, 0.7568. Light call options are supportive of a recovery above the 0.77 mark with a solid barrier at 0.78.

Turkey to cut 50 basis points

The Central Bank of Turkey (CBRT) is expected to cut the overnight lending rate by an additional 50 basis points at today’s policy meeting. Although the consensus is in favour of status quo regarding the benchmark repurchase and the overnight borrowing rate, the CBRT could take a chance on all three rates and cut the latter by 25 basis points. The dovish shift in Fed’s policy outlook, the low-to-negative rate environment in the Eurozone and the easing volatility in the lira could justify an unorthodox move to boost growth.

The USDTRY is consolidating below the 2.90 mark in Istanbul. Decent put options at 2.95 are expected to offer a cap on the upside.