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    European Session – Sterling rally pauses ahead of referendum; kiwi hits fresh 12-month high

    Trading in the currency markets was subdued a day before key risk seen on Thursday’s UK referendum on EU membership.

    An overall pro-risk bias remains though as recent polls have suggested the “remain” camp gaining more ground and as such, major currency pairs are holding onto gains made in the past few days.

    Sterling rose during the European session to reach a high of $1.4772, close to yesterday’s five-month high. Helping support the pound were UK bookmaker odds this morning reflecting the view that “remain” is a favorite to win.

    The euro moved back up above the key $1.13 level today, recovering from yesterday’s dip to the lower $1.12 area after ECB President Draghi’s testimony to the EU Parliament.

    The Australian and New Zealand dollars outperformed again today as these high-yielding currencies benefited from an improved risk appetite as Brexit fears eased this week.

    The aussie strengthened versus the greenback to rise back above the key $0.75 level. The kiwi continued its advance to hit a new one-year high of $0.7187.

    The Canadian dollar gained against its US counterpart to its strongest level in over a week, buoyed by positive Canadian retail sales data. USDCAD dropped to $1.2740 and remained below $1.28 throughout the European session.

    Canadian retail sales in April rose by 0.9% month-on-month after falling 0.8% in March, whose figure was revised up from a previously estimated 1.0% decline. The increase was the third in four months and matched forecasts of a 0.9% increase. Core retail sales which exclude automobiles, increased by 1.3% in April, beating expectations for a 0.6% increase.

    US existing home sales data lifted the dollar/yen pair slightly to a session high of 104.72 yen. Sales of previously owned homes rose at the fastest pace in more than nine years. Sales were up in May to a seasonally adjusted annual rate of 5.53 million, more or less in line with forecasts. April’s sales pace was revised down to 5.43 million.

    Looking ahead, Fed Chair Janet Yellen testifies for a second day at the US Congress. Today she will appear before the House Financial Services Committee. She is not expected to say anything new from yesterday when she spoke in front of the Senate with a cautious tone with regards to monetary policy.

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