Referendum week is upon us

20 June, 2016

Robin Haynes

Well, this is it – we have arrived at the week of the referendum on the UK’s continued membership of the EU. The nation goes to the polls on Thursday to make the biggest political and economic decision in a generation – and the financial market most likely to be immediately affected is the currency market.

Regular readers will be aware that the Pound has been closely following the opinion polls in recent weeks, and we could see unprecedented volatility through the week as speculation on the result, followed by the result itself in the early hours of Friday, filter through to the market. The Remain campaign have gained ground over the weekend, and the Pound has gained in value, providing an opportunity this morning for those of you who would like to secure a relatively good exchange rate in advance of the week’s last-minute campaigning and opinion polls.

Data out this week
For the rest of the world it is ‘business as usual’ this week, with a number of data releases out which would normally be of note. This week however, they are not likely to make any difference to the Pound at all. For the record, UK public borrowing is out tomorrow morning, then Fed chairman Janet Yellen speaks on Wednesday, and Eurozone services & manufacturing PMI are out on Thursday.

How volatile will rates be on Thursday and Friday?
This, of course, is the question nobody knows the answer to – some economists have predicted a 10-15% drop in the value of sterling if we vote to leave the EU. In theory if we see a Remain vote, the Pound could recover significantly too – so whichever way you look at it there could be opportunities as well as risks to consider this week. It is important to remember that predicting the markets is a very tricky business, and quite often we can see the opposite reaction to what we expect, so don’t rule anything out. If you have a foreign currency payment to make or receive in the coming weeks and months, it’s all about considering the risk to your exchange rate and not just leaving it to chance; talk to us at Currency Index and get some friendly, helpful guidance.