Two Key People to Watch

Markets bounced on the idea that a Brexit might not take place at all, we examine the two people most likely to determine whether or not it happens. The pound was the top performer on the day while the yen lagged but the overall moves were modest compared to the scope of the recent rout. Japanese retail sales are due later. Below is the link to today's Premium video, focusing on the existing trades and "Back to 2001-2008 Cycle & Gold-Oil Relation".

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The Brexit headlines haven't improved despite the tone in markets. European leaders continue to drive a hard line, saying they won't give Britain a better EU deal and won't even negotiate until Article 50 is invoked.

Chancellor Osborne confirmed taxes will be raised and spending will be cut.

On the UK side, the political landscape is increasingly rudderless. Cameron will resign and it's unclear who will replace him and what they plan to do. The contest won't be decided until Sept 9 and the deadline for nominations in Thursday. The two leading candidates are Boris Johnson and Theresa May. Johnson campaigned for the Leave side but was slow to make up his mind and it may have been an opportunistic play. May was a light Remain supporter but largely stayed on the sidelines.

Polls and betting sites but May ahead of Johnson, but only fractionally. More important than who wins is where they stand on the issues. Both are likely to declare their candidacies on Wednesday and we will be listening closely to their comments to get a sense of how hard they frame their campaigns.

If they attempt to shift their focus away from a Brexit decision or open the door to remaining, then the bounce today could extend potentially much further. However if one or both candidates (among others) are ardently in favour of a Brexit, then continue uncertainty will inevitably weigh on sentiment.

In terms of economic news in the hours ahead, Japanese retail sales at 2350 GMT are a highlight. The consensus is for a 1.6% y/y drop in May sales and a flat reading m/m. Market reaction is likely to be limited with the ebb and flow of the Brexit story continuing to dominate.