Maybank FX Insight - GBP - All Eyes on 23 Jun Referendum - 16 Jun 2016

    GBP: All Eyes on 23 Jun Referendum

      Opinion polls have now swung in favor of Brexit, ramping up market volatility (GBP 2w vols at all-time high of 39) and depressing the GBP.

      It remains our base case scenario for UK to vote to remain in the EU. In the event of Bremain (with clear margin over Brexit), FX vols should ease and sentiment should recover post-referendum. GBP should rebound. High beta currencies should see a breather rally while safe-haven (CHF, JPY) could unwind. USD could be mixed – weaker against the GBP and high-beta currencies but firmer against the safe-haven proxies. We favor GBPCHF on dips towards 1.36 levels.

      Our preliminary scenario analysis shows that in the event of Brexit, GBP and GBP/AXJs could move lower by around 10% on average. In the event of Bremain, GBP and GBP/AXJs could more higher by around 5% on average.