Finally, the week has arrived at long last! The one we’ve all been waiting for. No, not Rick Astley reaching number 1 in the charts again after a gap of 29 years. The EU referendum. Although, could the lyrics of Rick’s first song ‘Never gonna give you up’ give us a clue to how the EU vote is going to go? We’ll find out soon enough.
Sterling has been as volatile as the Turkish football fan who trashed his own house after his girlfriend ‘pranked’ him by turning the television on and off with an app during key moments of a Euro 2016 match. This week the sole focus of markets is going to be dedicated to the EU referendum. Last week polls suggested that the Leave campaign were in the lead and GBP came off sharply with 1.40 and 1.25 tested on GBP/USD and GBP/EUR respectively. The tables have now turned (again) and we’re back to the Remain campaign in the ascendency. Sterling has moved significantly since Friday and we’re up over 3% on GBP/EUR and GBP/USD.
Please have a look at the graphs below to see the moves from last Monday to this morning.
Have you covered off your exposure yet? Do you have upcoming requirements? Please do get in touch with a member of the Aston team today so we can discuss a strategy prior to Thursday. Are you a buyer of USD from GBP? If so, please take advantage of this move higher and lock in 50% of your exposure on a SPOT basis. We can then look at covering the remaining 50% off after the referendum vote. If we remain, we should see a bounce in Sterling of around 3% as some of the move may be starting to be priced in by markets. If we leave, then I’d expect GBP to come off quite considerably so at least you’ve taken 50% of your risk off the table. Likewise on GBP/EUR, please consider the same strategy if you are a buyer of Euro’s.
If you are seller of USD and EUR back to GBP we’ve moved in the wrong direction for you, at present. However, there will be dips over the next few days and on the day. Please get in touch and we can discuss adjusted levels for you to aim for on a market order basis. If we do vote to leave the EU then you can expect a considerable move in your favour. Please have things in place so you can take advantage of any upside whilst also mitigating some of your risk by securing some on a SPOT basis.
We have Janet Yellen and Mario Draghi speaking this week although any data releases and Central Bank speakers are going to take a back seat. It’s all about the referendum and there is going to be continued volatility. I’m not sure I can provide any more insightful comments as all has been said numerous times. We’ll find out on Thursday/Friday early morning.
Feel free to give me a call at the office this week to discuss your individual requirements.
Have a fantastic week.
Written by Liam Alexander