The pound erased losses against the dollar after the killing of a U.K. lawmaker Thursday fueled speculation the nation’s voters will be more likely to favor remaining in the European Union in next week’s referendum.
Both the “Remain” and “Leave” sides suspended campaigning on whether Britain should exit the EU after the attack. Labour Party lawmaker Jo Cox was murdered as she met constituents in her electoral district in West Yorkshire in the north of England. The Guardian newspaper reported an eyewitness saying Cox’s attacker had shouted “Britain First.” That’s the name of a group that campaigns against immigration and Britain’s membership in the EU.
“This is all stemming from the tragic news of the lawmaker being attacked and killed,” said Joe Manimbo, an analyst with Western Union Business Solutions, a unit of Western Union Co., in Washington. “It certainly stokes uncertainty, and I think the fact that Ms. Cox was a proponent of the Stay camp — that is seen as potentially lending some sympathetic support to keeping Britain in the EU.”
The pound climbed 0.1 percent, to $1.4218, as of 2:52 p.m. in New York, having fallen to $1.4013 earlier. The U.K. currency dropped 1.5 percent to 148.362 yen, retracing an earlier loss of 3.5 percent.
The prospect of Britain exiting the world’s largest trading bloc has fueled nervousness across the globe, with the Federal Reserve saying on Wednesday that the referendum was a factor in its decision to keep interest rates on hold. Bank of England officials led by Governor Mark Carney left policy unchanged Thursday and said a vote for a Brexit could damage the U.K. economy and trigger further weakness in the currency.
The Swiss National Bank also kept its rates unchanged Thursday. Officials there have said the British referendum has potential to cause “enormous stress” in Europe.
“A tragedy usually unites people rather than divides, so I think it is fair to assume that it might have an impact on voter sentiment in favor of remain,” said Mazen Issa, senior foreign-exchange strategist at Toronto-Dominion Bank in New York.
The pound touched a two-month low versus the dollar earlier Thursday after the BOE reiterated warnings about the risks of leaving the EU in its final policy meeting before the U.K. votes on its membership. A two-week measure of pound-dollar volatility based on option prices surged to the highest level on record this week as five polls in 24 hours showed more support for leaving the EU than remaining.
Traders noted the rebound in the pound coincided roughly with a deterioration in odds that Britons would elect to leave the EU as tracked by Oddschecker’s survey of bookmakers’ implied probability. Those odds slipped below 39 after surpassing 44 hours earlier.
“If you do see uncertainty, that typically will drive voters to the status quo,” said Karl Schamotta, director of foreign-exchange research and strategy in Toronto at Cambridge Global Payments, which hedges currencies for companies. The pound’s losses have been overdone, he said, and “we’re seeing a trade that’s entirely too crowded — at the end of the day, the market expectation remains that we will see a stay vote.”
Gold Prices Rise as Soft Dollar Supports Safe-haven Appeal
Gold prices firmed on Monday, propped up by a subdued dollar and slight retreat in the U.S. Treasury yields, with investors gearing up for a week of speeches from U.S. Federal Reserve policymakers for cues on the central bank’s rate hike path.
Spot gold was up 0.5% at $1,759.06 per ounce, as of 0400 GMT, while U.S. gold futures were up 0.4% at $1,759.00.
While the dollar index softened, the benchmark 10-year Treasury yields eased after hitting their highest since early-July. A weaker dollar offered support to gold prices, making bullion cheaper for holders of other currencies.
“Gold is still looking slightly precarious where it is right now, and it’s probably bouncing off key technical level around $1,750,” IG Market analyst Kyle Rodda said.
“Gold remains an yield story and that yield story is very much tied back to the tapering story.”
A slew of Fed officials are due to speak this week including Chairman Jerome Powell, who will testify this week before Congress on the central bank’s policy response to the pandemic.
“There’ll be a lot of questions being put to Fed speakers about what the dot plots implied last week and weather there is higher risk of heightened inflation going forward and that rate hikes could be coming in the first half of 2022,” Rodda added.
A pair of Federal Reserve policymakers said on Friday they felt the U.S. economy is already in good enough shape for the central bank to begin to withdraw support for the economy.
Gold is often considered a hedge against higher inflation, but a Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.
Investors also kept a close watch on developments in debt-laden property giant China Evergrande saga as the firm missed a payment on offshore bonds last week, with further payment due this week.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased 0.1% to 993.52 tonnes on Friday from 992.65 tonnes in the prior session.
Silver rose 0.9% to $22.61 per ounce.
Platinum climbed 1.3% to $994.91, while palladium gained 0.7% to $1,985.32.
Brent Crude Oil Near $80 Per Barrel Amid Supply Constraints
Oil prices rose for a fifth straight day on Monday with Brent heading for $80 amid supply concerns as parts of the world sees demand pick up with the easing of pandemic conditions.
Brent crude was up $1.14 or 1.5% at $79.23 a barrel by 0208 GMT, having risen a third consecutive week through Friday. U.S. Oil added $1.11 or 1.5% to $75.09, its highest since July, after rising for a fifth straight week last week.
“Supply tightness continues to draw on inventories across all regions,” ANZ Research said in a note.
Rising gas prices as also helping drive oil higher as the liquid becomes relatively cheaper for power generation, ANZ analysts said in the note.
Caught short by the demand rebound, members of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, have had difficulty raising output as under-investment or maintenance delays persist from the pandemic.
China’s first public sale of state oil reserves has barely acted to cap gains as PetroChina and Hengli Petrochemical bought four cargoes totalling about 4.43 million barrels.
India’s oil imports hit a three-month peak in August, rebounding from nearly one-year lows reached in July, as refiners in the second-biggest importer of crude stocked up in anticipation of higher demand.
Oil Holds Near Highest Since 2018 With Global Markets Tightening
Oil held steady near the highest close since 2018, with the global energy crunch set to increase demand for crude as stockpiles fall from the U.S. to China.
Futures in London headed for a third weekly gain. Global onshore crude stocks sank by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.
China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves said traders with the knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.
Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting prices may climb further amid the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas costs stay high, according to the Organization of Petroleum Exporting Countries.
“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
Various underlying oil market gauges are also pointing to a strengthening market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive about the market outlook.
At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.
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