This is the question that will be posed to the British public on the 23rd June 2016. The polls which got it so badly wrong in 2015 are on different days highlighting both sides a possible winners with no clear winner being determinable at present. The expectation does seem to lean towards the Remain vote rather than the Leave. This analysis is based purely on the fact that voters will be fearful of the unknown and be scared into voting Remain. What we do know is that the rate is likely to drop much further in the coming weeks as investors avoid sterling due to the risk that it will only lose further value.
Lately we have seen a very poor run of form for the UK and the pound with David Cameron coming under immense pressure because of his father’s tax affairs and the way the government is handling the decline of the Steel Industry. Mix in the rising trade deficit and economic indicators pointing towards a slowdown in various areas of the economy and we have all the ingredients to upset sterling exchange rates.
If you have a currency transfer involving the pound I would be preparing for further losses in the coming weeks and month. I firmly believe the storm clouds gathering over the UK will get darker and this predicament for the pound will get worse before it gets better. I expect GBPEUR to trade between 1.15-1.30 between now and June. For April to May I expect the range to be 1.20-1.25, May to be 1.18-1.25 and then for June 1.15-1.30. This big swing for June takes account of both the potential outcomes of the Brexit vote, eg a Leave vote would see a sharp devaluing of the currency whilst a Remain vote would see a big spike. I expect GBPUSD to trade between 1.36 and 1.47 for the same period (between now and the Referendum) and GBPAUD 1.60 – 1.90. If you wish to discuss these rates or want predictions on another pair please email me on email@example.com
What can I do to protect myself?
To try and navigate such uncertainty there are tools at your disposal to try and help limit your exposure. These are some of the more popular contracts to help manage your currency requirements.
Forward Contract – For a small deposit you can fix current exchange rates up to one year in advance. The rate is fixed throughout and you can draw down the funds at the fixed price when you pay off the deal.
Limit Order – You choose a higher level in the market you wish to buy at eg 1.30 on GBPEUR. Once the level is hit we automatically but for you at the desired level. Exchange rates move every second and can move 3 cents on particularly volatile days, this contract means you don’t miss out if it jumps about quickly.
Stop Loss – This is the opposite to the contract above, you choose a lower level you don’t want to get worse than and if the market drops you do not get worse than that rate. This is a great way to manage the price you receive in a market that is falling.
Trying to predict the currency markets is very difficult but from time to time there are events such as this referendum which do provide a predictable outcome. I firmly believe between now and June the pound will come under selling pressures because of the worries over the referendum and its possible outcome. Yes the rates might rise after but you do need to be rather brave to hang on for that amount of time and in the end there is no guarantee the rate will be higher or lower.
It is clear it is going to be a very uncertain few months so if you have any transfers to consider please keep in touch with us on the blog to keep up to date with the latest news and pound sterling forecast!
If you have any transfers you wish to learn some insight on please email the author Jonathan Watson on firstname.lastname@example.org. Jonathan is an Associate Director at one of the UK’s leading foreign exchange brokers and has written extensively on the Brexit, being quoted in newspapers and even appearing on BBC News, the story of which he will be more than happy to share with you.