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    European Session – Sterling reverses gains after new Brexit poll; gold falls further as Yellen testifies to Congress

    The currency markets have been focusing on Thursday’s UK referendum on EU membership and all eyes are on opinion polls which tend to have a large impact on the pound and other currencies as well.

    Sterling has had quite a good run in the last three trading days, rising to a five-month high of $1.4782 in the early part of the European session today on renewed hopes a Brexit will be averted, as indicated by some polls published on Monday. However, a new poll released today showed growing support for the “Leave” camp, consequently pushing down the pound to a session low of $1.4668.

    The latest Survation poll showed those wanting to leave the EU rising to 44% compared to a previous poll and those wanting to stay in the EU at 45%.

    The euro was steady against the dollar for most of the European session but soon broke below the key $1.13 level ahead of ECB President Mario Draghi’s testimony to the European Parliament. As he started speaking, the single currency fell further to reach a low of $1.1242.

    News and data out of Europe was mostly ignored and did not have much of an impact on the euro. The German constitutional court ruled in favour of the ECB’s OMT bond buying program. Data showed the German ZEW Economic Sentiment index was better than expected. The index jumped to 19.2 in June from 6.4 the previous month.

    Risky and high-yielding currencies like the New Zealand dollar benefited from the rise in risk appetite due to an overall easing of Brexit concerns.

    The kiwi rose to a fresh 12-month high of 0.7168 during the European session. The aussie also extended gains versus its US counterpart today to breach the key $0.75 level to hit $0.7511.

    The US dollar recovered against the yen by the start of the European session, reversing yesterday’s losses to rise to a session high of 104.73 yen.

    There are no US data releases scheduled for today, leaving the focus centered on Fed Chair Yellen’s testimony to the US Congress in Washington DC. Today she appeared before Senate lawmakers and tomorrow she will speak to the House Financial Services Committee.

    Yellen’s prepared testimony before the Senate panel reinforced the view the Fed would raise rates cautiously due to global risks and a sharp slowdown in job growth in May. However she said that the Fed expects inflation to rise to its 2% target in the medium term. Gold price fell on her comments to reach a low of $1265.31, down some $20 on the day so far.

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