Brexit: Trading Fixit – SocGen

Olivier Korber, Research Analyst at Societe generale, suggests that if ‘Brexit’ risk turns into ‘Fixit’, the cable will follow a square-root trajectory: under pressure until the 23 June vote, bouncing very sharply when the market unwinds, and establishing a range over 1.45-1.55 once the short covering is over.

Key Quotes

“Uncertainty will stay very elevated until the 23 June vote. This will maintain GBP volatility at very elevated levels on the way. Brexit risk has a larger impact on the GBP/USD than the EUR/GBP, as Europe would be much more impacted than the US economy. Both the EUR and GBP will be under pressure (the GBP more so), so that the biggest market reactions will be seen on the GBP/USD exchange rate.

Spot and options positioning suggests that the cable decline has further to go.”