Riskier currencies fall ahead of key Brexit vote

This week has been a poor week for a number of currencies, notably those offering a higher yield. We classify these as the “riskier” currencies as they can be susceptible to significant market movement due to currencies flows from investors. Currencies that would fall into this category would be the Autrsalian Dollar, New Zealand Dollar and the South African Rand.

If you look at the trends this week each one of these respective currencies have fallen quite sharply. GBP/AUD has gone from a high/low of 1.72117 to 1.7722 (2.8%) GBP/NZD from 1.8287 to 1.8641 (2%) and GBP/ZAR from 1.34 to 18.13 (4.5%). This suggests their has been a sell off from each of these currencies and a drive into “safe haven” currencies such as the US dollar and Swizz Franc.

Will this trend continue?

Much of the movement can be attributed to market uncertainty surrounding the key Brexit vote on the 11th December. The overriding consensus is that Prime Minister Teresa May will not get her Brexit bill passed and hence the market is in limbo as to what the alternative might be.

It is this uncertainty that is weighing on a number of currencies and I would expect further volatility today and the early part of next week. Of course, depending on the outcome of Tuesdays vote, I expect these currencies to struggle, particularly if a suitable alteranative to Theresa May’s propasal cant be found.

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