Last night as the last official polls came in before the UK Referendum markets reacted as you might expect given the last week of whipsawed trading. What you wouldn't expect is them to give ground so quickly before the votes are even tallied.
GO GREEN!- wait what?
Buy the Rumor, Sell the Rumor?
- GBP/USD touched a high of 1.4934 at 12:30 GMT only to back off to 1.480 price less than 3 hours later
- EUR/USD is off its hgihs of 1.141 adn is now trading 1.137
- FTSE retraced almost all of its move selling off 89 points from its 6367 highs.
- Gold, while still lower, has bounced off its lows by $5.00
Note that in retracement terms, the GBP has given back more today so far than the EURO. We feel that is because the GBP has to weaken regardless of the vote. The end-game post Referendum is to absorb the GBP into the EURO anyway.
What about the News?
Implied volatility is lower today across the board.This is from less hedging and/or portfolio managers taking hedges off. Why anyone would take hedges off PRE-news is crazy, but it is what it is (greed). Lower vol is a reflection of their diminishing fear. Assuming the pollsters and volatility trends are correct, its a good guess we have seen the ranges for the day in many markets. But as long as people are involved in decisions, mistakes can be made.
Buy the rumor, sell the rumor, buy the rumor (repeat until broke). Sell the Brexit hangover
-Soren K.
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