Talking Points:
- Pound soars, Yen drops as polls show "Brexit" support ebbing
- Financial markets may overlook RBA minutes, Yellen testimony
- UK referendum threatens to unleash unprecedented volatility
The British Pound and the Euro soared after a set of polls released over the weekend pointed to ebbing support for "Brexit" ahead of the UK EU membership referendum later this week. Risk sentiment swelled, with commodity-bloc currencies and crude oil following shares higher while the Yen, gold and US Treasury bond futures fell in tandem.
While the week ahead offers a wealth of typically market-moving event risk - minutes from the last RBA meeting, testimony from Fed Chair Janet Yellen and flash Eurozone PMI figures are all on tap - investors are likely to be singularly focused on the UK's in/out referendum on EU membership on Thursday.
One-week implied volatility readings are grotesquely high across the G10 FX space and price action at the start of the week underscores the danger posed by Brexit-related news flow across the universe of assets. It seems prudent for traders to stand aside and watch the fireworks from the sidelines.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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