Wall Street futures indicated a higher open on Tuesday as the “Remain” camp for Britain’s Thursday referendum took the lead in polls.
Meanwhile, market players anticipate Federal Reserve chief Janet Yellen’s comment regarding the timing of the next interest rate hike and hints on the future path of US monetary policy due later in the session.
The blue-chip Dow futures rallied 68 points or 0.38%, the S&P 500 futures climbed 10 points, or 0.48%, and Nasdaq 100 futures added 22 points, or 0.50%.
GBP/USD continued to advance, reaching 1.4781 today—its highest level since the EU referendum date was announced. This lent credibility to market confidence that Britain would not opt to leave the bloc.
Meanwhile, US markets watched developments closely due to the consequences a decision to leave could have on American companies based in the UK and risk factors from forex markets on exports should Britain and Europe separate.
“Remain” Campaign Leading in Polls
Markets continued to focus on the possibility of a Brexit, with the votes steering towards “Remain” in the polls published over the weekend.
According to online betting service Betfair on Tuesday, at there was a 77% probability that the Britons would vote to stay in the European Union, pushed up at an estimated 10% from the previous week’s odds.
JP Morgan, however, cautioned that the race is still close and Tuesday’s polls presented a mixed picture despite surveys earlier in the week granting a clearer victory to remain in the bloc.
Yellen on Rate Hike, US Monetary Policy
Janet Yellen had already cautioned in her June 15 press conference that Brexit “could have consequences for economic and financial conditions in global financial markets.”
“If it does so, it could have consequences in turn for the U.S. economic outlook that would be a factor in deciding on the appropriate path of policy,” the Fed chief added. In that topic, Yellen was set to start her two-day congressional testimony today with the Brexit issue in the background.
Her appearance comes less than a week after the Fed kept interest rates unchanged near record lows and lowered its forecasts for 2017 and 2018 hikes. Expectations were plausibly low for Yellen to hint on the future path of policy normalization.
However, investors will focus on her reactions to lawmakers’ questions to see if Congress might gain new information. Though the median forecast of Fed officials in June was for two rate hikes this 2016, Fed fund futures put the odds at 54% for the hike to come in the December meeting.
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