DAILY FX WRAP – Brexit fears lead to significant weakness in GBP, while commodity linked currencies benefit from a potential OPEC production freeze.
London Mayor Boris Johnson was center stage as the week kicked off with full focus on Brexit fears, seeing GBP plummet against major pairs. GBP/USD fell over 2.5 points throughout the day after Johnson, who as well as being London's mayor is also seen as a potential successor to PM Cameron, announced he would be campaigning to leave the EU.
Of note, a recent Ipsos/MORI poll found that of all the politicians in the UK, only Johnson was capable of affecting the outcome of the referendum, adding a potential 15% to the ‘Leave’ campaign. As such, GBP/USD at one point broke below 1.4100, although paring some of these losses ahead of the European close.
While GBP also fell against EUR, the move was not quite as severe given that a Brexit would also be interpreted as net negative for the Eurozone. Given that both EUR and GBP softened amid Brexit fears, the USD-index also gained over 0.5% today to break above 97.190, a major resistance level.
One of the biggest moves of the day came in GBP/CAD which fell on the day by around 5 points, with the GBP weakness exacerbated by gains in the commodity linked currency after WTI and Brent rallied amid hope of an OPEC/Non-OPEC deal. In terms of commodity specific news, there was no one key driver behind the move higher, however Russia stated that they have set March 1st as a deadline for completing consultations. Separately, sources reported that the Iraq oil minister informed ministers that although Iraq will not join Doha's MOU, they will not boost crude production level in next 4 months either.
As has been the case over the past few months, the energy complex has also guided the wider sentiment across asset classes, dragging energy specific equity names higher as well as commodity linked currencies. As a result of the more risk on sentiment, USD/JPY traded higher throughout the session, spending the majority of the session above 113.00.