The British Pound moved in a range of 293 pips in the past two days against the USD. After plunging to 3-weeks low on Monday, GBPUSD soared by more than 160 pips in less than two minutes during Tuesdays early Asian trading session. The spike was attributed to a fat finger during a session of low liquidity, and the pound’s volatility against U.S. dollar was elevated to highest level since 2009. Voting polls are not helping traders to move the cable in one direction and there will be clearly no winner amongst bulls and bears as long as polls continue to provide conflicting views. Although GBPUSD likely to remain very volatile in the next couple of days I believe the wide 1.40 – 1.48 range to persist until the referendum date on June 23.
Dollar bulls are likely to take a full week break as Fed Chair Janet Yellen failed to convince investors that the economy was not as bad as they think. There’s only tier-two economic data on the U.S. calendar for the rest of the week that would barely trigger any significant moves on the US currency, meaning that traders will remain in wait-and-see mode until the Federal Reserve meets on 14-15 June. In order to revive long bets, the statement should provide similar stong hints to what it did in October 2015 when they hiked the meeting that followed in December stating that: “In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation.” This would elevate markets expectation towards a July rate hike and provide the USD the needed support, otherwise bears are likely to remain in control for some more time.
Oil prices on both sides of the Atlantic continued to hold above $50 a barrel early Wednesday following attacks on oil infrastructure by militants in the Niger Delta, dragging Nigeria’s crude output below 1 million barrel a day. Higher-than-expected inventories drop according to American Petroleum Institute also helped prices to remain elevated as data showed inventories fell by 3.6 million barrels in the week to June 3, meanwhile traders will await official number from Energy Information Administration later today. Although the rally has been attributed to stronger than expected demand and U.S. shale output declines, risk premium driven by supply interruptions will be the key factor to determine whether prices will continue to hold above $50 or not in the short term.
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