There has been some selling of the £ sterling since the prospect of the UK leaving the EU first loomed over the markets. The referendum is in late June so it is much in the news and departure is considered a real possibility. In addition, the current account deficit which has been ignored for years is now back as a topic of interest and is considered to be too big and unlikely to shrink. This is notoriously hard to measure so these pronouncements should be treated with some suspicion.
Now, this selling has produced a pair of daily scale extensions against the € and the Swiss franc – the first chart is £ per €, the second is Swiss francs per £ so they are inverted. The third chart is ‘Cable’ ($ per £) and this too has drooped a bit but there is no extension – indeed there has recently been a compression but the £/$ price is still in the same range that it has been for some weeks, although at the lower end of it:
These extensions mean that this is a chance to buy some pounds, for at least a bounce. It will be at the mercy of opinion polls for the weeks before June 23rd but these have recently turned slightly in favour of ‘remain’ and the ‘vote leave’ campaign is quite disorganised. As a result there will probably be more of a drift toward ‘remain’ in the near future which will probably give the £ a boost. The eventual result is anyone’s guess and there will probably be more volatility as the day approaches. Our opinion of what the proper vote should be is available if you want it. It may be best to buy the £ against the € rather than the Swiss franc, or even against the $ if you don’t mind that new compression getting in the way.
In other news, gold futures re-compressed yesterday after trading above the prior day’s compression for most of yesterday’s session. This means the compressed condition is still unresolved and so we cannot yet predict which way the coming trend will go. We will advise:
