- EU Referendum Suspension Ends – Pound Euro exchange rate forecast to endure massive price swings when markets reopen
- Pound Sterling Forecast to Fluctuate Significantly – Implied volatility expected to reach record-high levels
- Euro Exchange Rates Also Expected to be Subject to Brexit Volatility – Many economists predict that the Euro will be hardest hit by a Brexit vote
- Domestic Data Forecast to have a Diminished Impact – EU referendum uncertainty predicted to dominate trader focus
GBP EUR Rallies Beyond 1.30
Growing support for the ‘Remain’ campaign saw the Pound extend previous gains against peers like the Euro and US Dollar, with the Pound Euro exchange rate climbing to 1.3040.
The Pound US Dollar exchange rate, meanwhile, climbed all the way to a five-month high off the back of EU referendum news.
Endorsement for remaining part of the European Union came from a number of influential figures on Tuesday, including David Beckham.
Given the popularity of Beckham, it’s believed his support for ‘Remain’ may sway a number of undecided voters.
The Pound largely retained gains over the course of Wednesday, although the currency’s uptrend eased ahead of the vote.
(Previously updated 20/06/2016)
Pound Euro Exchange Rate Jumps over 1%, GBP Nears 1.30 Today
The Pound Euro exchange rate surged by over 1% during Monday’s European session.
The GBP EUR pairing’s ascension to a high of 1.2937 was largely due to the British currency rallying in the wake of polls showing increased support for the ‘Remain’ campaign.
With sentiment shifting to the UK voting to remain within the EU, the Pound also jumped against peers like the US Dollar, Australian Dollar and New Zealand Dollar.
The Pound held gains as the European session drew to an end and could push higher still if ‘Remain’ support continues increasing.
(Previously updated 08:00 20/06/2016)
With a matter of days until UK citizens make a decision that is likely to rock the financial world irrespective of the outcome, brewing uncertainty is likely to dictate market volatility.
EU referendum speculation has been the most significant cause of Pound Euro exchange rate volatility in 2016, with the pairing shifting by as much as ten cents since the date of the vote was announced earlier in the year.
The current uptrend in the GBP EUR exchange rate began last week following a suspension of campaigning activities in light of the tragic killing of Labour MP Jo Cox.
With the Brexit referendum debate heating up with just days to go before the vote, the Pound Euro currency pair is likely to experience significant further movement.
If the UK votes to remain in the EU it has been forecast that the pairing could advance to 1.36.
Brexit Debate Kicks Back into Action, Pound Euro Exchange Rate Forecast to Fluctuate
Towards the close of last week market volatility cooled as traders took respite from suspended EU referendum campaigning.
With the debate now kicked back in to gear, however, the GBP EUR exchange rate is expected to endure record-high levels of volatility.
‘We do expect more volatility next week given there’s still so much uncertainty,’ said Chris Chapman, a London-based trader. ‘The ‘Leave’ side had appeared to gain momentum, but it’s unclear how much the terrible event on Thursday could temper that momentum.’
Such is the importance of the vote it will actually have a massive impact on the market as a whole, with assets attached to risk potential fallout victims.
The impact is already evident with significant financial institutions, such as the Federal Reserve, not considering altering monetary policy until after the conclusion of the referendum.
Whatever the outcome of the vote the currency market is set for a shock. If Britain votes to stay the impact may only be short lived, but the potential for massive Sterling gains could be detrimental.
With most high-level financial institutions predicting a massive economic shock if the UK votes to leave, however, a Brexit is likely to have a more lasting impact.
IMF Warns of UK Recession on a Brexit Vote, Macron says the UK will be Like Guernsey
One of those highly influential institutions to make dire warnings of the consequences of Brexit is the International Monetary Fund (IMF). The organisation warned that the UK could slide into recession if it votes to quit Europe.
‘While recognizing that this choice is for UK voters to make and that their decisions will reflect both economic and non-economic factors, directors agreed that the net economic effects of leaving the EU would likely be negative and substantial.’
The IMF predict that one of the major impacts of a Brexit would be the reduction in access to British financial services. As the services sector accounts for the vast majority of British gross domestic product, traders have taken this warning very seriously and will likely react by selling the Pound in droves should the UK vote to leave.
‘Exit from the single market would almost certainly reduce market access of UK-based financial firms — both domestic and foreign — to the EU, subject them to regulatory uncertainty for some time, and force them to re-examine business models,’ the IMF said.
It is not just financial institutions that have chimed in on the debate. Politicians from all over the globe have had their say, demonstrating the far reaching implications of the vote.
Just recently the French Economy Minister, Emmanuel Macron, stated that ‘Leaving the EU would mean the ‘Guernseyfication’ of the UK, which would then be a little country on the world scale. It would isolate itself and become a trading post and arbitration place at Europe’s border.’
Macron added; ‘If the UK wants a treaty of commercial access to the European market, the British will have to contribute to the European budget like the Norwegians or the Swiss. If London doesn’t want that, then the exit will have to be total.’
This is unlikely to be well received by those wishing to vote out, and could be fodder for campaigners to highlight the overwhelming use of scare tactics.
Whatever the outcome of the vote, the only certainty in the build-up is that uncertainty will be the main driver of GBP EUR exchange rates.
