Pound back to the Lovely Days of Princess Diana

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Brexit risk looks fully priced in to us.  Reminiscent of Y2K, fears have gone viral.  The British Pound is back to the lovely days of Princess Diana.

The In / Out referendum on Britain’s future in the EU will be held in just over six weeks, on June 23, 2016. Prime Minister David Cameron is in favour of continued British membership, under the terms he negotiated early in 2016. Cameron has the support of the Chancellor the Exchequer George Osbourne, and the majority – but not all – of his Cabinet. Several cabinet members, including prominent Tories are campaigning for a so called Brexit. Outside of the Cabinet, the popular former Mayor of London Boris Johnston will also campaign in favour of Brexit.

British Pound, on Key Support

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Pound

The next three largest parties in the House of Commons – Labour, the SNP, and the Liberal Democrats, are all campaigning for Britain to remain in the EU. The Eurosceptic UKIP has only one seat in parliament but received 12.7% of the vote in the 2015 general election. Unsurprisingly, it is campaigning for Brexit.

ICM Poll, May 6-8

Leave: 46%

Stay: 44%

Undecided: 10%

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Record Low Yield for the Australian 10 Year

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AUSTRALIAN 10-YEAR BOND YIELD DROPS TO RECORD LOW AT 2.22%Aus 10s

Most wish it was a growth story, but there’s little faith in the global economy.

Since February, emerging market asset prices have been supported by two factors, both of which will prove fleeting.

Up until May 3rd, Janet Yellen had her foot on the US Dollar’s neck, while the PBOC expanded credit in China at the fastest pace since 2009. The dollar index DXY plunged 6.7% between March 2nd and May 3rd.  In a reversal, as the dollar surged emerging-market currencies fell for seven consecutive days through Friday, the longest losing streak since March 2015.

If global investors really trusted China’s recovery, they wouldn’t be piling into Aussie 10s at 2.20%.

Bloomberg’s monthly gross domestic product tracker for China shows growth slowed to 6.88% in April, from 7.11% in March.

Growth is likely far slower, 1-2% at best.

Weak steel and coal output dragged on industrial production, which increased 6% from a year earlier versus economists’ forecasts of 6.5%, while retail and investment readings also disappointed.

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