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How could British Pound react to Brexit?
The key here is uncertainty. No one really knows how a Brexit would eventually turn out, just as no one was really able to accurately predict what will happen to the EU when the European Union formed years ago. But only by the anticipation of Brexit British Pound has become incredibly volatile. This means that the GBP (Mr. British Pound) would most likely dance to the beat of market sentiment.
On that note, Mr. Pound's moves versus its major forex dancing partners has been on the negative side. We could only imagine how volatile the market could get at the time of the referendum.
Trading Strategy
Invest Diva Diamond suggests for Pound strategies.
Expect downward pressure to continue till June 13: From what we have seen on the charts, Mr. British Pound gets low every time the Brexit topic gets hot. This could certainly continue until the day of the referendum on June 23, 2016. We could see minor corrections along the way.
GBP could Jump up if UK remains in EU: Ultimately it will come down to the day of the referendum. If you are planning to trade the news, you could expect a jump if the majority of the Brits vote to stay in the European Union. Brexit risk will be off, and British Pound will go back to focusing on the UK economy for a change
In case of a Brexit: The immediate aftereffect of a Brexit vote would potentially be to the downside. Then, we could expect the BOE to try and calm the investors down by announcing an interest rate hike. In that case, it could actually be a good time to buy the British Pound when it hits the lows, and wait for David Cameron to come to the rescue.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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