Pound continues to fall as ‘Brexit’ chances increase

The Pound has been in decline over the past week, caused by the ongoing uncertainty surrounding the imminent UK referendum. Just over a week ago, GBP/EUR was up at €1.32 and all the polls seemed to suggest remaining in the EU was very likely. Fast forward a week, and it’s a very different picture.

Further polls over the weekend by YouGov and TNS both show that the ‘Leave’ campaign has the lead. This follows polls last week showing the same things. As a result, the Pound has fallen further against other currencies, illustrated below in a graph showing GBP/EUR over the last week dropping from €1.32 to €1.27:

The reason the Pound is falling is due to the uncertainty a ‘Brexit’ would cause for the UK economy. It doesn’t matter what your view or my view is on whether the UK should remain in the EU, what matters is that investors hate uncertainty, and the more likely it is that we’ll leave, the lower the Pound is likely to go. This is what we have seen over the last week as polls have swung towards leaving.

The volatility in the currency markets is probably only going to increase as we get closer to the 23rd June.

Craig Erlam, a Senior currency analyst at Oanda said today: “The polls are likely to make people rather uneasy and we can see that quite clearly today in the pound,” adding that “With both sides likely to step up their game over the next couple of weeks, I imagine we’ll see a lot more volatility in the pound and the closer the polls get, or if ‘Vote Leave’ continues to push ahead, the pound may find itself back towards April’s lows before too long.

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What else could move exchange rates this week

Any further polls or developments with regards to the referendum are likely to be the main mover of exchange rates this week, however we also have the usual scheduled data releases that will also have an impact. I have detailed the main releases below. For a tailored outline of what could move the currency pair you’re interested in, click here.

Monday 6th June 2016It’s pretty quiet on the data front today, with only UK retail sales on the agenda for the UK.

Tuesday 7th June 2016Nothing from the UK today, but EU GDP figures are released at 10am that could move GBP/EUR. We also have an interest ate decision from Australia that could move GBP/AUD.

Wednesday 8th June 2016Today is probably the most important for Sterling, with the latest Industrial and Manufacturing production numbers, along with a GDP estimate and the latest Housing prices.

Thursday 9th June 2016Germany releases trade balance figures today, and the USA it’s latest Jobless Claims.

Friday 10th June 2016A quiet end to the week with inflation numbers from Germany, and a monthly budget statement from the FED. Any clues on when the USA will raise interest rates could affect the currency markets.

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