With the Brexit referendum result looming which currencies may move the most against the pound? 22 June 2016.
There's been lots of justifiable/considered talk recently, as well as hype, about the impact of the result impacting on the pound in serious fashion. I can't tell you the outcome of the referendum but I can tell that whatever the result we will see rapid moves in GBP pairs. NSS I hear you cry? lol
But which should move the most I hear you ask? Good question, so let's have a quick look.
Well, GBPUSD will grab the headlines but other prime movers will be GBPJPY, GBPCHF and other safe-haven/risk-affected/commodity currencies. Earlier today in the comments section someone asked me the impact against the Aussie $ and we have to be aware that GBPAUD should move higher on a Remain result on general GBP strength and that in turn should see AUDUSD selling as cross-pair trading ends up in core-pair arbitrage. However losses in that pair would be tempered by risk-on/commodity-led demand for AUD elsewhere. The scenario works in reverse ofc on a Leave outcome.
Similar price actions can be expected in GBPCAD and USDCAD for example but what of EURGBP ? Well, what we don't know is how far any negative euro impact has yet to be factored in. There is little doubt in my mind that the price-range/degree of movement here will play out on core pairs and others related too but the effect may be more muted. Leave would send the pair immediately higher ( GBP weakness) but this should be tempered by the knock-on implications for the Eurozone. On the other hand a vote to Remain will send the pair lower (GBP strength) to be tempered by a relief rally in EURUSD and other euro-pairs.
It's all very confusing I know, and there's no rocket science/experience/algo box that can tell us the precise extent to which all these scenarios will play out but forewarned is forearmed. It will certainly benefit you to cast your net a little wider than usual to be aware of all this potential impact going on.
For those of you still unsure of how cross-pair flows play out then sign up to our ACT course where next week I will be hosting a live 2 hour webinar explaining liquidity, flows, order boards and option expiries in far more detail than I can post here. Ryan will also be hosting his own must-attend session.