Sterling and the euro inched higher on the last day of campaigning before Britain’s referendum on European Union membership, the pound trading just off its highest this year after a swing in polls towards the “In” camp this week. The pound would appreciate against Asian currencies, the stocks and bonds of Asia’s emerging markets would benefit, while reduced uncertainty would support commodities. Europe’s FTSEuroFirst index of 300 leading shares was up 0.6 percent, Germany’s DAX was up 1.1 percent, France’s CAC 40 up 0.9 percent and Britain’s FTSE 100 up 0.8 percent. It inched 0.1 percent lower to 93.916, but remained above a two-week trough of 93.425 set overnight.
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“The contest looks to be more closely fought than thought”, Mizuho Bank Ltd. wrote in a daily commentary. The Nikkei 225 closed down 8 percent, its biggest fall since the global financial crisis in 2008. Other Asian markets were poised to finish the day with their biggest losses in several years.
Britons head to the polls on June 23 to cast a vote that would determine if the United Kingdom (UK) should remain or leave the 28-member European Union trade bloc.
The euro rose 0.4 percent to $1.13405, while the dollar index, which tracks the greenback against a basket of six rival currencies, slipped 0.1 percent to 93.479. The Japanese currency, which is often sought by investors in times of market uncertainty, also fell 0.6% to 104.58 per dollar. But at the same time, “the expectation is that it’s going to be a ‘remain, ‘ so you don’t want to be too over-the-top in your caution”, Adair said.
Crude oil prices rose after settling down more than 1 percent on Wednesday after the U.S. government reported a smaller-than-expected inventory drawdown.
As investors grew more hopeful of a “Remain” vote, spot gold languished, falling 0.2 percent to a near-two-week low of $1,262 an ounce.
The euro rose 0.8 percent to $1.1371. “Exit negotiations should be concluded within 2 years at max”. “In recent sessions, markets have been reacting to every indicator, opinion poll and betting odds alike”. Hong Kong’s Hang Seng index tumbled 4.4 per cent to 19,942.90 and Australia’s S&P/ASX 200 fell 3.2 per cent to 5,113.20.
European stock markets also headed for a sharply lower open on Friday, pre-market calls from financial bookmakers suggested.
USA markets were set to start with big losses as well. At one point it jumped 2.4 percent Monday to a three-week high of $1.4708.
“We are staring at something very close indeed”, said Chris Weston, Melbourne-based chief market strategist at IG Ltd. There was no clear sign of intervention by global central banks but Japan said it would respond to “extremely nervous” exchange-rate moves, signalling a readiness to intervene to stem excessive yen strength.
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The dollar slipped 0.2 per cent against the yen to 104.57 yen, after a brief rally to 105.065 overnight as Ms Yellen expressed general optimism about the United States economy.
