The Pound / Euro X-Rate Targets Being Forecast for Referendum Results Night
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The British pound has fallen back from its best levels against the euro and dollar since May - but where will the pound trade following the release of results on Thursday night?
We get the sense that the pound has witnessed its best levels ahead of the referendum outcome, which is likely to be made known at around 4AM on Friday the 24th.
However, analysts believe that the release of privately conducted exit polls at around 10PM on Thursday evening could really set sterling in motion, so with big moves being promised, it is likely GBP will consolidate over coming hours.
Also keep in mind that various constituencies are already pegged out as being pro-Leave and pro-Remain. Therefore, watching the outcomes in these areas could also provide some hefty moves for the pound.
That said, low liquidity conditions could see the currency bucked about a bit, but directionality is only likely to be found on results night.
Note that while polling data is split evenly, bookmakers are ascribing a 73% chance the UK votes to Remain in Europe.
Our base-case at this stage is sterling will ultimately move higher.
The problem we have is trying to ascertain just how high it can go.
We are poring over the research that sits on our desk in order to try and gauge how far the limits to any post-referendum move would be.
Brexit Result Targets and Ranges for the Pound
Firstly, with regards to a Brexit result, there is a common agreement that the initial reaction would be one of steep declines.
I note not many analysts are too fussed when it comes to calling any specific targets; perhaps this betrays an inherent bias that such an outcome will be unlikely?
Or, it could reflect that calling the bottom is simply too difficult and ultimately futile.
Incidentally, the size of the potential decline only keeps growing if we consider just how sterling is move at present; the higher it goes, the further the fall.
“A pro-Brexit outcome would cause the correction to deepen, with an initial downside of between GBP/USD 1.38 and 1.35,” says Asmara Jamaleh, an analyst with Intesa Sanpaolo in Milan, Italy.
Jamaleh cites the 1.35 mark is an important threshold, as it was the low hit in January 2009, below which the exchange rate only dropped as far back as in 1985.
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