The risk-on mood that developed as Asia markets opened yesterday on the back of the weekend poll from the Sunday Mirror pointing to a swing back to the remain vote gathered more force overnight, especially in European markets.  After a 2.34% rise in the Nikkei 225 and 1.82% in the ASX200, European equities had stronger gains as Sterling buying returned.  The Eurostoxx 600 index jumped 3.65%, the FTSE up 3.04% and the DAX by 3.43%. UK gilt and German bund yields rose.  Oil and metals rose from a softer USD, while gold was only fractionally lower.  Elsewhere in the region, the INR has been more volatile on news that well-regarded RBI Governor Rajan is standing down.

It’s been nothing less than a five big figure gain for the GBP/USD since Asia opened yesterday from 1.42 to test 1.47 overnight, close to where it sits this morning.  (A ORB/Telegraph poll showed 53% remain, 46% leave.) The big move in sterling is a clear example of how edgy markets are to the outcome of Thursday’s referendum.  A milder bid tone spilled over to the AUD/USD testing the higher 0.74s overnight, now trading at 0.7450.

There’s been no major data release overnight.  EU President Tusk urged British citizens to “stay with us”.  In the US, Minneapolis Fed President Neel Kashkari was speaking on “Too Big to Fail” but was naturally asked about the economy and Brexit in the Q&A.  He said it would be better for the world economy is the UK voted to stay in the EU but that Brexit financial stability risks for the US would likely be modest.  He sees moderate growth with inflation gradually rising to 2% and declined to disclose how many rate cuts would be warranted.  He welcomed James Bullard’s “out of the box” approach to think about Fed monetary policy.

Coming up

There are three RBA events today, all will get some analytical if not attention from market traders.  The RBA’s Guy Debelle is speaking at 9.25am on “Liquidity in Australian Fixed Income Markets”.  He’s seen as a penetrating thinker on the market.  The other RBA speaker is Alexandra Heath, Head of Economic Analysis Department who is speaking at a lunchtime CEDA Energy Series 2016 function; no title is as yet available for that address.

Between these two speeches comes the RBA Minutes when we’ll get more detail on how the Board has been viewing progress of the economy through to the first week of June, including after Q1 GDP.  The market will also be interested to glean whether the RBA harbours any real inclination toward an easing bias (none was outlined in the 1 June Media Release) and any updated thinking on the currency beyond its potential to “complicate” the economy’s adjustment should it appreciate.

There is also the ABS measure of house prices today, but as this is quarterly and only to March, this release is largely now one of historical interest, given the CoreLogic-RP Data house price data is up to late June already.  Elsewhere in the region, the BoJ publishes its April meeting minutes this morning at 9.50 AEST.

Tonight, the main event focus will be on Fed Chair Yellen’s semi-annual testimony on the economy and monetary policy to the Senate, the testimony to the House Wednesday.  As well as the usual questioning on the economy and rates there’ll no doubt be discussion of Brexit and the approach to the outlook for rates outlined by James Bullard of the St Louis Fed last Friday, virtually assuming little to no change in rates from here with the St Louis Fed’s view that the economy, unemployment and inflation close to long run equilibrium/ medium term goals.

If you wanted a little more event risk to ponder, late this afternoon (18.00 AEST), the German Constitutional Court is bringing down a ruling on the legality of ECB Outright Monetary Transactions (OMT), due at 18.00 AEST.

Overnight

On global stock markets, the S&P 500 was +0.58%. Bond markets saw US 10-years +8.08bp to 1.69%. In commodities, Brent crude oil +2.50% to $50.4, gold-0.1% to $1,293, iron ore +0.0% to $51.06. AUD is at 0.7458 and the range since yesterday 5pm Sydney time is 0.7443 to 0.7479.

Good luck.

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• Markets Today: 21 June 2016 (PDF, 1MB)

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