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Count down to Brexit vote
The US dollar has further softened as Federal Reserve Chair Janet Yellen sounded more dovish than expected at her semi-annual testimony yesterday. Yellen said she expects a turnaround in the labour market slowdown over the coming months, without giving a precise timeline for the balance sheet reduction. The second part of the testimony is due out today. At this point, the probability of a June hike tanked to 10%. The market gives less than a 30% chance for an interest rate hike in September.

Oil and commodity markets were a better bid in Asia. WTI traded above the $50/barrel level for the first time since June 10th. Gold is cheaper despite the upcoming Brexit referendum and limited appetite in the US dollar. The 50-day moving average, 1256.50, is expected to lend support as the market environment is not comfortable enough to let gold loosen below the $1255/1250 heading into the risky trading hours pre-Brexit vote.

In London, suspense is in the air. The UK will decide whether or not to stay part of the European Union on June 23rd. No one knows the outcome of tomorrow’s referendum. History will tell whether or not the close call in opinion polls was just a coincidence or if it was part of reality vis-à-vis the UK’s discomfort at the heart of the EU.

The GBPUSD hovers around its 200-day moving average, 1.4680. Decent call expiries are expected to lend support above the 1.46 mark today, the bias turns negative below this level. The EURGBP consolidated below the 0.77 mark. Trend and momentum indicators remain comfortably negative for a potential extension towards the 200-day moving average, 0.7570.

FTSE stocks to diverge

FTSE remains upbeat on better oil and commodity prices. The market appears to have briefly pushed Brexit risks aside. Nevertheless, the sentiment could rapidly turn sour should the slightest panic hit the headlines. Any sell-off could gain momentum as many would not hesitate to close their long positions and turn flat walking into the Brexit referendum. Offers are eyed at 6300/6325 zone.

Miners lead gains in London with Anglo American (+2.22%), Glencore (+1.85%), BHP Billiton (+1.39%), Rio Tinto (+1.38%) and Antofagasta (+1.34%). Randgold (-0.23%) is again among the leading losers on cheaper gold prices.

Royal Dutch Shell (+1.06%) and BP (1.06%) are well bid with the barrel of oil trading above the $50 mark.

In the wake of the Brexit referendum, we expect a divergence in sector performances. Financials, banks, construction and housing stocks are very sensitive to Brexit-related volatility, while healthcare, consumer staples and utility stocks are expected to fluctuate less, both on the positive and the negative side in the run up to the referendum.