Currency markets were predominantly driven by risk appetite in the absence of key economic data releases during the European session on Monday.
Investors traded according to the upbeat sentiment that carried over from the Asian session into Europe and rather than on fundamentals. Consequently, safe havens remained weaker as money flowed back to risk. The market focus was on the UK vote on EU membership on June 23.
The latest polls showed the “remain” campaign gaining ground against those favouring a Brexit, helping boost sterling by 2% versus the dollar today.
Due to the lack of major UK data releases scheduled for this week, the main driver of the pound was the Brexit debate. The big shift in the opinion polls over the weekend which suggested a higher probability of a vote to stay in the EU in the referendum on Thursday, has improved demand for the British currency.
After opening with a gap higher in the Asian session, the pound extended its advance against the greenback in the European session to reach a high of $1.4671, the strongest level in June so far and is on track for the largest one day gain since 2008. Sterling tumbled to as low as $1.4013 last week after several polls put the “leave” camp ahead.
The euro held onto gains made in Asia and traded around $1.1330 in Europe following an Asian session high of $1.1381. The single currency is benefitting from the improvement in sentiment surrounding the UK referendum.
The safe haven yen came under pressure against the dollar today although it only made modest losses. The dollar yen pair barely moved in Europe and traded between 104.36 and 104.57 yen.
A broad based US dollar weakness helped lift risk currencies like the Australian and Canadian dollar and buoyed commodities like oil.
The aussie climbed higher against its US counterpart in the European session to hit a high of $0.7480. On Friday the pair had closed at $0.7391.
The Canadian dollar also continued to strengthen in Europe, thereby pushing the USDCAD pair down to $1.2773, the lowest in a week. The oil-sensitive loonie was also buoyed by a rise in crude prices.
Brent crude rose to a session high of $50.37 a barrel while US oil futures were up to $49.75 a barrel.
Gold was down from Friday’s close but its slide was minimal due to the weaker dollar. The precious metal traded around $1,285 an ounce.
Data released during the European session today included German PPI and Canadian wholesale sales, both having little impact on currencies. The main upcoming risk events will be Fed Chair Yellen’s congressional appearances scheduled for Tuesday and Wednesday. Also, ECB President Mario Draghi will testify on monetary policy before the European Parliament’s Economic and Monetary Affairs Committee in Brussels on Tuesday.
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