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Brexit 2016 British Pound Expectations | The Who, How & What


Mar.22.2016

Brexit 2016 British Pound Expectations

Brussel's bombing did not help with the Brexit risk. The UK is facing an uncertainty which could ultimately impact its economy: "Britain exiting the European Union" known as Brexit. Just in the anticipation of a potential Brexit 2016 British Pound is already dancing down to the beat of rumors. What will happen to the GBP in case of a Brexit? Let's build a forex trading strategy with the help of the Invest Diva Diamond Analysis.

Brexit 2016 British Pound Euro impact cartoon clipart GBP EUR Flag Brexit 2016 British Pound Euro Impact GBP - EUR Forex Dance Floor

 

1-Brexit 2016 British Pound - Fundamentals

 

Let's first start with what the heck a Brexit is: it simply means an EXIT of BRitain from the European Union. On February 20th David Cameron, Britain's prime minister, set June 23rd as the date for a referendum on Breixt. Several recent polls have shown small majorities in favor of a Brexit at the referendum.

Why are there Brexit talks?

The Brexit 2016 topic became especially popular in February. However rumors about it have been around for years. Even at the best of times Britain has always been a semi-detached member of the EU. Simply put, many British people think they can do better alone. They also think the EU benefits more from the UK, than UK from EU. Economic problems with some members of the EU, such as Greece, haven't made the EU membership any more appealing either. Let alone horrible terror attacks in France and Brussels.

 

Who is in favor of a Brexit?

Brexit 2016 supporters mostly include people who are worried about immigration and border control. The polls suggest the public is overwhelmingly sympathetic to the idea that Britain needs to restrict immigration.

"Control our borders", "make our own laws", "get our money back from Brussels" are a few of their Brexit 2016 campaign slogans. High levels of immigration and fear of terrorism have increased the "let's-leave" temptation.

On the other hand, we have some international Brexit supporters as well. Mostly those who'd like to see the dissolution of the EU itself. They believe that the UK leaving would create an EU dissolution momentum. And right after a Brexit, we could see other EU members leaving the union as well.

These international supporters include Vladimir Putin’s Russia, far right French National Front leader Marine Le Pen, and an assortment of other European radicals and populists.

Who doesn't fancy a Brexit?

Number one Brexit 2016 opposition would be the majority of UK’s top businesses. Their CEOs fear the disastrous consequences of it.

A pro-EU letter was signed by just over one-third of the heads of the FTSE 100.

The City of London is largely in favor of staying inside the EU.

Also a non-supporter is UK’s most important strategic ally, the United States.

How could a Brexit 2016 impact the UK's economy?

Business Insider recently reporter a dooms day scenario set by Confederation of British Industry (CBI).  Even if Britain secured some form of new trade deal with the EU, they believe the UK economy will still be at massive risk.

On the other hand, we have a debate going on about housing prices in case of a Brexit.

Here's are what some analysis reports show:

  • Jobs: Leaving the EU could cost 950,000 jobs lost by 2020
  • GDP: Brexit 2016 could cost the UK as much as £100 billion – the equivalent of around 5% of GDP — by 2020.
  • Housing market: Anthony Codling, of the broker Jefferies, believes housing prices probably won't change much in case of a Brexit. His argument is that a Brexit makes no difference to the average man on the street. Whether you want to move house or have another child makes no difference in or out of Europe.

The debate on how a Brexit could impact the UK economy remains pretty heated. While there seem to be a number of positive outcomes especially in terms of safety, there could be long-term damages to the UK economy as well.

How could British Pound react to Brexit 2016? 

The key here is uncertainty. No one really knows how a Brexit would eventually turn out, just as no one was really able to accurately predict what will happen to the EU when the European Union formed years ago. But only by the anticipation of Brexit 2016 British Pound has become incredibly volatile. This means that the GBP (Mr. British Pound) would most likely dance to the beat of market sentiment.

On that note, Mr. Pound's moves versus its major forex dancing partners has been on the negative side. We could only imagine how volatile the market could get at the time of the referendum. If you are thinking of trading the news right before/ after June 23rd, we need to do more analysis.

 

So keep on reading!

 

2- Brexit 2016 British Pound - Long term Technicals

We can't blame it all on Brexit, but Mr. Pound dropped massively versus his major forex dancing partners as Brexit debate got hotter in January and February. It also coincided with when BOE changed their interest rate hike forecast from "soon" to "not any time soon".

GBP/USD: This dancing pair tested an all-time-low level at around 1.39, and stayed there longer than anticipated. Once the Brexit talks cooled down a bit, the pair moved back up in March.

Brexit 2016 British Pound US dollar Monthly GBPUSD technical forex analysis chart Brexit 2016 British Pound vs US dollar: Monthly GBP/USD Chart

GBP/JPY: In my previous GBP/JPY update I signaled a temporary correction after the formation of three-black-crows on the monthly chart. (Patting my self on the shoulder) the correction certainly started beginning of March right at the 50% Fibonacci at 158. This made the 158 level even stronger. The pair remains above the ichimoku cloud.

Brexit 2016 British Pound Japanese Yen Monthly GBPJPY technical forex analysis chart Brexit 2016 British Pound vs Japanese Yen: Monthly GBP/JPY technical forex chart

 

3-Brexit 2016 British Pound - Sentiment

 

On the daily chart the GBP/USD pair was not able to break above the ichimoku cloud, and formed a spinning top pattern followed by a strong bearish candlestick. With this,the sentiment appears to remain to the downside. The Brussels terror attack has increased the risk of a Brexit in 2016. The impact is visible on the shorter time frame charts.

Same could be said about GBP/JPY market sentiment, as the pair is now heading back down to the 158 level

Brexit 2016 British Pound Trading Strategy

Now that we've crushed the fundamentals, market sentiment and technical points, let's see what the Invest Diva Diamond suggests for Brexit 2016 British Pound strategies.

Expect downward pressure to continue till June 13: From what we have seen on the charts, Mr. British Pound gets low every time the Brexit topic gets hot. This could certainly continue until the day of the referendum on June 23, 2016. We could see minor corrections along the way.

 GBP could Jump up if UK remains in EU: Ultimately it will come down to the day of the referendum. If you are planning to trade the news, you could expect a jump if the majority of the Brits vote to stay in the European Union. Brexit risk will be off, and British Pound will go back to focusing on the UK economy for a change

In case of a Brexit: The immediate aftereffect of a Brexit vote would potentially be to the downside. Then, we could expect the BOE to try and calm the investors down by announcing an interest rate hike. In that case, it could actually be a good time to buy the British Pound when it hits the lows, and wait for David Cameron to come to the rescue.

We are praying for those affected in the Brussels attack. Brexit or no Brexit, let's hope there will be an end to terrorism.

Kiana Danial

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