Most of us don’t like uncertainty. On the face of it, the markets appear not to like it but traders, for the most part, love it. After all, get it right and there are very healthy profits to be made. Get it wrong though and it can be painful.
Swings in sentiment can provide opportunities and none more so than the currency market. Yesterday (Monday 20th June) Sterling posted its biggest one-day gain in eight years on the back of improved sentiment for the ‘leave’ campaign according to a number of Polls. With two days before the vote, Sterling is heading for its biggest three-day gain since 2009.
Stock-markets also posted strong returns on the back of this momentum but Gilts and safe havens like Gold fell as there was a flight into riskier assets.
Will this momentum continue. If we ‘remain’ in Europe then this pattern will continue, certainly in the short term. Vote to leave and traders will inevitably favour perceived safe havens.
Chair of the Blue Sky investment committee
Written 21st June 2016