Brexit Risks Dominate 2016 for Pound v Dollar Rate

Over the forthcoming days, Britain, led by Prime Minster David Cameron, will look to renegotiate its membership of the EU. There are many things up for discussion, most notably immigration and the overall cost of the EU. But is Britain’s current deal that bad?

Figures from 2014 show that Britain ranks 9th out of all EU member states when it comes to total budget contribution per person. Importantly, the Netherlands, Sweden, Germany and Denmark are the top four net contributors. On this basis, its makes the case for a renegotiation package even harder for Britain, with likely many other EU states feeling that we have nothing to complain about. What does this mean for Britain? Without a reform deal from the EU, then the next step will be a referendum to the UK general public on either remaining or exiting the European Union.

The ramifications of this step are huge. With a possible ‘Brexit’ on the cards, in my opinion, this is why GBPUSD is lower from 1.50 at the beginning of the year to its current price of 1.4350. Well-regarded investment banks are even predicting that with a British exit of the EU, we could move to as low as 1.25. Should a deal be agreed with the EU, this would halt the process of a referendum.

Whatever your view of Britain either remaining or leaving the EU, using GBPUSD to trade as part of your strategy should mean you are perfectly positioned for any large move up or down.

Good luck,

Jordan Hiscott, Chief Trader at Ayondo