In the short term, the referendum has caused the pound to weaken, with the pound slumping to a seven year low against the dollar soon after David Cameron announced the date of the referendum. The IN campaign will tell you that just the risk of a Brexit is enough to weaken the pound, but a lot of the weakness is stemming from the uncertainty rather than fear of a specific result.
As we get closer to the day of the vote, anybody holding GBP might be tempted to cut their losses and sell it. This is likely a poor idea, and stems from a misunderstanding as to why the GBP is weak. The best thing you can do is to hold on to your GBP until after the referendum, as the pound is likely to get stronger again when the future of the UK – either within the EU or as an independent country – is certain.
For those of you that are comfortable with high risk investing, then short selling the GBP in the run up to the referendum is a potential option. The GBP is likely to weaken a bit more yet, particularly as the gap between Remain and Leave closes.
This certainly isn’t an option for the faint hearted, but when combined with purchasing a significant amount of GBP prior to results day with the intention of selling it when the GBP recovers, could net you some serious profit.
The likelihood that GBP will recover post result day is so strong that trading binary options could be considered. Trading binary options in the UK has generally had a bit of a mixed reputation, due to a fair number of people going into binary options without proper prior knowledge, but the events surrounding the EU referendum and its impact on the GBP can be understood with relative certainty.
This gives rise to opportunity within binary option trading, by researching and effectively predicting the direction of currency as the circumstances change.
What about after the referendum, in the long term? There’s been a number of reports over the last few years that if the UK votes to remain in the EU that they will be forced to join the Euro by 2020. This isn’t something that is getting highlighted at the moment, but were it to come to pass then it would negatively impact the GBP.
Issues
The Euro has hit a number of issues over the last few years, with a number of Eurozone countries facing massive economic problems. Were this to happen, short selling the pound would be a great way to profit, but otherwise the GBP is likely to recover to pre referendum levels.
The strength of the GBP is harder to predict in the case of a Brexit, as it entirely depends on Britain’s success in making its own trade deals. As it’ll take a minimum of 2 years for Britain to achieve a Brexit if they vote for it, Britain will only be uncoupled from the European Union about 2018/2019 – close to a general election, meaning that there will be further uncertainty, which is never popular amongst investors.
Whether you like or dislike his politics, the current leader of the Labour party Jeremy Corbyn is fairly unpopular amongst business leaders, and if it seems that he and his party may win, Britain making its own trade deals will be seen as unlikely, and in turn the GBP will face another period of weakness.
