Pound Sterling (GBP) Euro (EUR) Exchange Rate Forecast for Volatility in Near-Term

June 22, 2016 - Written by Tim Boyer

STORY LINK Pound Sterling (GBP) Euro (EUR) Exchange Rate Forecast for Volatility in Near-Term

The near-future may bring dramatic shifts in the Pound to Euro exchange rate, owing to EU Referendum results coming in over the night and Friday morning.

The Pound has managed to remain positive against the Euro recently, though this gain could fall away once voting begins tomorrow.

Pound Sterling (GBP) Exchange Rates Extend Gains despite Overvaluation Concerns

Support continued to flow the way of the Pound Sterling (currency : GBP) during yesterday’s session, sending the Pound euro exchange rate up to close to the 1.3100 GBP EUR threshold. However, dire predictions from one of the world’s premier investors have emphasises the grave danger that the near-term bout of Sterling strength could yet prove ephemeral.

George Soros of Soros Fund Management gained his reputation on one fateful Wednesday in 1992. The currency trader became known as ‘the man who broke the Bank of England’ by short selling the Pound Sterling, making $1 bn in the process, on what has become known as ‘Black Wednesday’ – the day that the Pound was forced out of the Exchange Rate Mechanism (ERM).

Soros Fears Unprecedented Sterling Depreciation if the UK Votes for Brexit

Soros raised the spectre of that fateful day in a think piece for Britain’s Guardian newspaper in which he forecast a ‘Black Friday’ for Sterling, should UK voters come out in favour of a Brexit in tomorrow’s European Union membership referendum.

The Hungarian Currency Wizard asserted that, ‘Sterling is almost -certain to fall steeply and quickly if leave wins the referendum,’ before going on to predict, ‘this devaluation to be bigger and also more disruptive than the 15% ¬devaluation that occurred in September 1992, when I was fortunate enough to make a -substantial profit for my hedge fund investors at the expense of the Bank of England and the British government.’

Soros went on to ramp up the potential losses which a Brexit would trigger for British households, stating that, ‘too many believe that a vote to leave will have no effect on their personal financial positions. This is wishful thinking. If Britain leaves the EU it will have at least one very clear and immediate effect that will touch every household: the value of the pound would decline -precipitously. A vote to leave the EU would also have an immediate and dramatic impact on financial markets, investment, prices and jobs’.

Investors holding Sterling assets will be hoping that UK voters heed the dire forecasts from Soros when the polls open at 0700hrs local time tomorrow.

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TAGS: Euro Forecasts Pound Euro Forecasts Pound Sterling Forecasts