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Bloomberg
It’s almost upon us: the week when Britain takes the historic decision of whether to remain in the EU. And whatever the polls say in the days to come — and regardless of the result on June 24 — the pound is set for a wild ride.
One-week anticipated volatility surged to the highest on record, posting the biggest increase among more than 40 global currencies tracked by Bloomberg.
It’s already been a week of ups and downs for sterling, which tumbled to a two-month low on Thursday after the Bank of England warned about a “sharp†drop on a Brexit and five polls in 24 hours put the “Leave†camp ahead. The currency strengthened on Friday as campaigning was suspended following the murder of lawmaker Jo Cox.
“We do expect more volatility next week given there’s still so much uncertainty,†said Chris Chapman, a London-based trader at Manulife Asset Management (Europe) Ltd. “The ‘Leave’ side had appeared to gain momentum, but it’s unclear how much the terrible event on Thursday could temper that momentum.â€
Interesting Times
It’s been a period of extremes all around. Yields on 10-year U.K. government bonds tumbled to a record on Thursday, along with those on Japanese debt, while German yields with maturities of as long as 10 years also fell to the lowest ever.
The bonds that rallied are all viewed by investors as havens from market turmoil. The pound avoided a third straight weekly drop, ending the week up 0.2 percent at $1.4286. It’s still fallen against all of its Group-of-10 counterparts since Feb. 20, when PM David Cameron set the date of the referendum as June 23. Sterling climbed 0.1 percent in the week to 78.80 pence per euro.
