A Look at the Post-Brexit Signs Outside FX

The Brexit bounce continued for a second day, although GBP slipped late in the day.  Sterling was still the top performer and the yen lagged for the second day in a row. Japanese industrial production and Australian credit data is due later. A new trade was issued in USD, shaped by the conspiring 55-WMA.

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The sterling story is well-established and we continue to await the declarations from the Conservative leadership  --Johnson and May ahead of the Thursday deadline.

In the meantime, other markets are sending notable and at times conflicting signals. Signs from the bond market are clear, US 30-year yields fell to the lowest since Jan 2015 in an indication that the Fed hiking cycle will be shallow if it's not yet over.

That dovetails with the rebound in stock markets. The S&P 500 finished 35 points higher Wednesday in the second large gains. It also closed above the 61.8% retracement of the Brexit decline.

The commodity market in many cases has exceeded pre-vote levels. Copper is at the best level since early May. WTI crude climbed to $50, just 45-cents from the high on the eve of the referendum.

In turn, USD/CAD struggled above 1.30 and fell to a session low at 1.2934 late in the day.

Predictions of central bank easing may prove to be overstated. ECB sources stories said Draghi is planning to wait and see for the economic data, rather than responding to markets. Carney has scheduled a speech for Thursday.

If other central banks brush aside the vote, the US dollar could still have some upside but it's still early days. We worry that quarter-end could be sending muddied signals.

The pound and yen reversed parts of recent moves for the second day but the magnitude of the bounce pales in comparison to the fall.

In terms of economic data, the next numbers to watch are Japanese industrial production for May at 2350 GMT and Australian private sector credit at 0130 GMT. Expectations are for a 0.2% decline and 0.5% rise, respectively.