In this transition week of pre Brexit, the international stock exchanges (especially European) have been at the mercy of the polls and projections of ‘what will happen if the United Kingdom will leave or remain in the European Union’.
The latest polls see the advantage of ‘leave’ although the British bookmakers continue to give more chance to ‘remain’.
In this scenario, the stock exchanges could only fall into a downward spiral losing small percentage points every day.
The deep red days have happened especially for EUR/USD which closed Thursday’s session at -1.08%, equivalent to a price of $ 1.1141, thereby returning to the important psychological support of the moving average at 200 periods.
To play even more the alarm bells there were the statements of some European politicians and the comments and decisions of the Bank of Japan and the Federal Reserve.
The two central banks of US and Japan (Federal Reserve and Bank of Japan) have preached caution ahead of next Thursday’s vote, confirming its monetary policy.
The BoJ has virtually postponed to next month the decision to field possible new monetary stimulus leaving its interest rate at -0,1%. The Fed should have scheduled only one rising in 2016.
For the fourth consecutive time the Fed has left the cost of the retainer money between 0.25% and 0.50%: to weigh on the decision, as well as the dreaded Brexit effect, it was also the latest disappointing employment results.
This has panicked the investors that moved towards safe haven assets. The dollar benefited from this rush since the market might see in a potential Brexit the Eurozone end. Meanwhile, the euro zone continues to remain in deflation.
In this miasma, the yen is experiencing new surges that led him to score new lows in foreign exchange EUR/JPY and USD/JPY, constantly being updated. EUR/JPY is around 116 and USD/JPY at 103.
The yen becomes more and more the safe heaven asset in this time of uncertainty. Meanwhile, the markets leave no respite to dollar-yen and euro-yen traveling to discover new lows in recent years.
To decide to leave rates unchanged at + 0.5% was also the Bank of England. In the report released by the British central bank it is represented the scenarios that the UK is experiencing in this period: the imminent Brexit, the risk of a collapse in the pound and the measures implemented to improve the health of British banks.
The report on the index of consumer prices in the UK has disappointed the analysts’ expectations. In the month of May, inflation rose by 0.2% from the previous month, compared with + 0.3% of last month. Compared to last year, consumer prices marked a + 0.3% against a forecast of + 0.4%.
Unemployment in the UK has instead fallen to the lows of November 2005. In April, the unemployment rate in the English economy fell to 5%, compared with the previous result and the consensus of 5.1%.
Unlike what everyone else does, we do not feel to make odds. What is certain is that both in the case of ‘leave’ and in the case of ‘remain’, the stock exchanges all over the world and the exchange rates will have something to say.