Referendum Traders Beware, Remain Has Not Won Yet and Potential Market Moves

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Referendum Traders Beware, Remain Has Not Won Yet and Potential Market Moves

Referendum Traders Beware, Remain Has Not Won Yet and Potential Market Moves

The Market and Political View from Adam Jepsen, Founder, Financial Spreads.


Referendum Traders Beware, Remain Hasn't Won Yet and Potential Market Moves

The financial markets seem to be ignoring the risks and taking the latest polls as the actual Referendum result.

Yesterday, the FTSE 100 closed about 150 points higher and sterling gained 2 cents against the dollar.

Given the EU referendum is an unprecedented event, one might expect the markets to be cautious and taking money off the table. That certainly wasn't the case with Monday's trading.

The Remain campaign had a positive weekend but the vote on Thursday is far from a foregone conclusion: The current risk-on sentiment could well be misguided.


- - - - Potential Market Moves - - -

We have been writing to clients and warning them about the hazards of trading the referendum due to the possibility of some extreme volatility around the event.

With the markets in seemingly bullish mode that could make the volatility even more severe should the Leavers win the vote.

If so, while unlikely, it would not be a complete surprise to see extreme moves such as: Having said that, George Soros, has come out and said that if there is a Brexit then GBP/USD could drop more than 20% and fall below $1.15.

To give the scale of this move a little perspective, when the UK left the Exchange Rate Mechanism in September 1992, the biggest single day drop for GBP/USD was about 4.5%. The pair dropped about 11% over the course of the month.

This kind of market action is tempting for investors but it also makes it difficult to trade profitably.




By Adam Jepsen, 20 June 2016


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