European equities started cautiously as traders eyes are turning to the Brexit vote that is likely to see Sterling’s and FTSE stocks volatility skyrocket. London is trading 0.70% higher in the early morning, the DAX is adding 0.65%, and CAC40 is trading up 0.72%. Germany’s 10-year yield fell less than one basis point to 0.23 percent, the lowest in a week. Britain’s 10-year yield gained one basis point to 1.305 percent, the highest in almost three weeks. The spread of Italy’s 10-year bonds over Germany’s decreased less than one basis point to 2.6091 percentage points.
On the Lookout: Investors widely expect that Theresa May will lose the Brexit vote and while initial price actions are likely to depend on the size of Theresa Mays defeat, the focus will mainly be on what will happen next, if the vote defeated by a significant margin, the opposition party may call early elections. Sterling, however, could rise if the vote is defeated by a margin of 50 or below. The UK House of Commons is expected to vote on the Brexit deal between 19:00-21:00 GMT
The France Consumer Price Index (EU norm) (YoY) came in line with expectations (1.9%) in December.
On the other hand, volume dropped by around 26.5K contracts, keeping the choppy activity in place so far. All in all, serious traders should stay away from the pair today as high volatility can destroy any forex portfolio. The cable implied volatility has hit an 18-month high at 26% as options traders expect a 1% move in GBP on either side
USDJPY: The pair today received some serious bid and hit the daily high at 108.74. USDJPY found support for the third day in the row at 108.20, and that gave bulls the upper hand. The longer picture is still negative for the pair and only a break above previous week high at 109.09 will attract solid buying. Strong resistance for the pair stands at 113.83 the previous month high. On the downside, immediate support can be found at the 108.20 double bottom and then at 107.90 previous week low.