On the 23 rd of June the United Kingdom will hold a referendum to decide whether it should remain in the European Union or whether it should leave. A potential leaving of the European Union by the UK has been dubbed ‘Brexit’ and the polls are currently suggesting that it can go either way.
This uncertainty has weighed heavily on the British pound since the beginning of the year and is poised to spark strong volatility in Britain’s currency in the wake of the referendum, regardless of the outcome. This in turn creates the opportunity to generate strong trading profits in the currency market.
In this post you will be introduced to the main currencies to watch as a forex trader, once the referendum results have been announced. The Swiss Franc
Since the beginning of the year investors and currency traders have moved their pounds into safer currencies, such as the Swiss franc, as suggested by British bank HSBC , in anticipation of a possible steep decline in value of the pound, should the British public vote ‘no’ to remaining in the EU. HSBC’s currency market analysts make the argument that the Swiss franc will strengthen should the UK public vote ‘yes’ to the UK leaving the EU, as more funds from the UK will flow into the safe haven currency. However, should British voters decide to stay in the EU, the Swiss franc will not be negatively affected by that outcome. Hence, a suggested hedge against a potential steep decline in the British pound would be to buy Swiss francs. Having said that, as a forex trader you could also put this trade on as a risk trade, with a beneficial risk-return ratio, as the downside risk is rather limited and the upside potential could be very lucrative. The […]
