Market Overview: Tick tock tick tock tick tock… The highly anticipated “Brexit” vote is fast approaching and markets appear to be comfortable with the idea that Great Britain will vote to stay in the EU. This key vote will be closely watched by markets around the globe, and a vote to stay in the union may drive risk appetite. On the other hand, if the nation does in fact vote to exit the EU, it is difficult to say just how markets may react. Heavy volatility could be seen in stocks, currencies and interest rates as investors try to gauge what type of longer-term impact such a move could potentially have.
Key Market Data: The latest reading on MBA Mortgage Applications was released earlier today and showed a decline in the purchase index for last week. The refinance index, however, showed a gain of seven percent as low mortgage rates entice homeowners to refinance.
Existing Home Sales showed a reading of 5.530 million on an annualized basis. While the housing market is not “on fire,” it is still showing signs of strength. Low mortgage rates may potentially keep the housing sector moving in the right direction for the foreseeable future.
Fed Chairwoman Janet Yellen is also speaking this morning in front of the House Financial Services Committee. Ms. Yellen will be giving testimony and discussing recent economic developments and her views on the economy.
Outside Markets: Stocks are moderately higher today as investors appear to be a lot less anxious about tomorrow’s “Brexit” referendum. Stocks remain near previous all-time highs and could see a run towards those levels if Great Britain votes to remain in the EU. Also possibly working in favor of higher equities is the notion of the Fed keeping rates at current levels for longer than originally anticipated.
As risk appetite remains fairly robust, interest rates are rising slightly today while the dollar index is modestly lower. If the people of Great Britain decide to remain in the EU, risk appetite could increase further and the dollar could potentially decline. The greenback remains within striking distance of the May lows, and a breach below those lows could potentially send the dollar on a fresh leg lower while possibly giving gold and precious metals a boost.
The Big Picture: Gold and silver have been seeing some selling in recent sessions as concerns over a possible “Brexit” seem to have largely abated. That could, of course, change quickly if it appears the nation will vote to exit the EU. While gold and silver remain near recent highs, a vote to remain in the EU and increasing risk appetite could potentially weigh on the precious metals. It is still likely that any good dips in gold and silver may be bought, although the bulls could possibly face some significant tests if Great Britain votes to remain in the EU and investors feel a strong appetite for risk.