Forex Traders Squaring Positions Ahead Of New Month

The pound rallied on Wednesday gaining 145 points to trade at 1.3492 as the FTSE recovered most of its Brexit losses. The FTSE saw a gain of 226.61 or 3.69% to trade at 6367.00 as it looks like the “Leavers” will see only a few if no changes to the UK-Eurozone relationship. New possibilities are surfacing as Brexit leaders back off their campaign promises and are slowly losing control of the situation as the reality that the UK cannot close its borders and change the economy overnight. The EU told the UK directly there are no negotiations over open borders and freedom of movement.

David Cameron seems to have totally closed the book on conversations and negotiations just remaining in office until a new replacement can be appointed or Parliament decides what to do next. Perhaps another vote.

Most Brexit fears are easing off except safe haven trades did send gold up $10 for the day to 1327. It seems that most of the markets are just moving forward bored and tired of the headlines. Stock markets are continuing to recover some of the deep losses experienced shortly after last week’s Brexit vote.

The major U.S. market indexes were showing similar gains. The Dow Jones industrial average was up 198.23 points at 17,607.95, the broader S&P 500 composite index advanced 25.67 points to 2,061.76 and the Nasdaq composite gained 63.97 points to 4,755.84.

The dollar is slowly giving back some of its risk off inspired gains, while the Japanese yen dipped 83 points to 102.73 but still remains way too strong for the Bank of Japan to breathe a sigh of relief. CNBC said that Japan’s policymakers can’t do much to yank the yen off the Everest-style peaks it’s scaled since the U.K. voted to exit the European Union (EU), Goldman Sachs’ chief Japan strategist cautioned.

Kathy Matsui’s comments came as Japanese Prime Minister Shinzo Abe said the government was continuing to watch movements in the equities and forex markets, adding that the Brexit’s impact on Japan’s economy may not be visible until the medium to long-term.
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Bank of Japan Governor Haruhiko Kuroda said the central bank was ready to take steps to ensure financial markets continued to function normally, Reuters reported, while Finance Minister Taro Aso reiterated that he was closely watching the foreign-exchange market and would respond if necessary.

The yen has surged in the wake of the Brexit referendum results on Friday, with the dollar fetching just 101.62 yen. That was down from the dollar/yen currency pair’s 106.81-yen level early in Friday’s session, when the remain camp appeared to be headed for a win.

The dollar fell against most currencies Wednesday, as worries subsided about the immediate effects of a U.K. vote to leave the European Union. The weaker US dollar gave the euro a bit of a jump to trade above the 1.11 level. While many investors remain uncertain about how the separation will effect global growth, the lack of any fresh news has given traders an opportunity to take profits on recent sharp currency moves, said the chief market analyst at Commonwealth Foreign Exchange, in a note to clients.

However, “the overall level of uncertainty surrounding the Brexit and what it will mean for the U.K., the EU and broader global financial markets remains at historic levels,” Mr. Eisner said.

Investors are also squaring away positions as the second quarter comes to a close, and ahead of a long weekend in the U.S., analysts said.