The UK voted out with the pound crashing and the euro following. What’s next? Here are opinins from two banks.
Here is their view, courtesy of eFXnews:
Brexit Wins: GBP/USD Towards 1.20-1.25, EUR/USD Towards 1.06 – SocGen
We continue to look for GBP/USD to trade around a 1.30-1.35 range for now (i.e. a little lower than here) and eventually, towards 1.20-1.25.
EUR/GBP will rise further and indeed has already risen faster than our initial estimates, but we don’t expect a move to 0.90 (from 0.83 now).
The yen has gained across the board and is the only major currency to have risen against the US dollar, which has rallied by over 2 ½% on a trade weighted basis. But concern about the economic fall-out in Europe is likely to see the Euro fall further in the weeks ahead too – it’s actually held up rather better than I for one expected but a drop to 1.06 in EUR/USD seems likely. Political fallout has already seen Scandinavian and CEE currencies fall on concerns about what this means for the EU and it’s far too early to fade those move.
Brexit Wins: GBP/USD Towards 1.30 – BNPP
We view that as the UK votes to exit the EU, four factors are set to weigh on the GBP: uncertainty; financial market stress; foreign direct investment (FDI); and other capital flows.
We expect that GBPUSD is likely to decline as low as 1.30, while the Q3 ’16 and Q4’16 forecasts have been lowered to 1.35 and 1.38 respectively. EURGBP is forecast at 0.82 and 0.80 over these horizons. The traditional safe havens, the JPY and CHF, will probably continue to strengthen.
Commenting on the referendum result outside of 10 Downing Street during London morning, Prime minister David Cameron said that he will continue as premier for the next three months, after which he will resign.
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