From where we sit today, the outcome of the UK referendum set for June 23 on whether or not to remain a member of the EU is anyone’s guess. Members of Prime Minister David Cameron’s ruling Conservative party are free to choose which side to back, although the Government’s official position – including Mr. Cameron’s – is to remain in the union (see video below).
Unless one side takes a commanding lead in Brexit referendum polls (which are sure to become a part of daily discussions in the UK through to the vote date), and even if one side does take a lead, it looks like the GBP is in for a bumpy ride over the next four months.
This weekend’s activity is a very good microcosm of what is likely to happen. The GBPUSD strengthened by more than 1% late Friday, after Mr. Cameron indicated that he had secured a deal on membership terms with EU leaders, giving the UK “special status”. However early Monday trading in the Far East saw the Pound reverse down by more than 1%, after popular London Mayor (and Conservative MP) Boris Johnson said over the weekend that he’d back the ‘exit’ vote.
Up 1%, down 1%…. expect a lot more volatility in GBP cross rates over the coming months.
What this means for UK financial spreadbetting and FX brokers, of course, is a lot more business. More general interest in FX rates, more trading volumes – and more revenues and profits for leading UK online brokers such as IG Group Holdings plc (LON:IGG), Plus500 Ltd (LON:PLUS), ETX Capital, London Capital Group Holdings plc (LON:LCG), Hantec Markets, PhillipCapital UK, and the newly-public CMC Markets Plc (LON:CMCX)
There is a very simple equation which usually holds true in Forex trading – more volatility means more volumes for brokers. And the trend seems to accelerate when volatility lasts for longer stretches of time, which is again likely to happen here.
Where the Pound will be come June 23 is anyone’s guess. However one thing we’re fairly sure of – it won’t be a smooth straight line between here and there.
Mr. Cameron’s comments can be seen here: