How to Profit from the EU Referendum?

This is a discussion on How to Profit from the EU Referendum? within the Economic & Fundamental Analysis forums, part of the Methods category; Originally Posted by tomorton I think there's money t be made regardless of what I think. However, what I think ...

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Old Mar 5, 2016, 6:20pm   #17
 
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Originally Posted by tomorton View Post
I think there's money t be made regardless of what I think.

However, what I think is -
the UK should remain in the EU
the referendum result will be to remain in the EU
if there is a Brexit referendum result, the GBP will probably have bottomed by the time of the official announcement.
You seem pretty certain that the UK will stay in the EU. What makes you so certain?

Buy your reasoning, does that mean that we should see a spike in the value of the pound if they decide to stay in the EU?

If UK does leave the EU, and you believe the pound will plummet I also believe that euro will plummet as well. I think the euro will be hurt more than the pound will.

I am hoping that the UK decides to leave the EU. I believe this will benefit non-EU currencies.
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Old Mar 5, 2016, 10:41pm   #18
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The pound will recover if it becomes clear to the market the referendum is going to be a stay in result and/or if the pound has simply reached a technical level that's good for the big players to buy in at for the long term. These points could be well before the referendum date, the results will already be price in by the time the count starts. Meantime, uncertainty makes it a sell.

Yes, the euro is strongly coupled to the pound and to London. I believe that more euros are traded in London per day than traded plus spent in the whole of the euro-zone. EUR/USD took a big hit as soon as the referendum date was confirmed. Its hard to think of a currency linked to the GDP of an economic union getting stronger when one of its best component economies has just departed.
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Old Mar 5, 2016, 10:48pm   #19
 
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Originally Posted by tomorton View Post
The pound will recover if it becomes clear to the market the referendum is going to be a stay in result and/or if the pound has simply reached a technical level that's good for the big players to buy in at for the long term. These points could be well before the referendum date, the results will already be price in by the time the count starts. Meantime, uncertainty makes it a sell.

Yes, the euro is strongly coupled to the pound and to London. I believe that more euros are traded in London per day than traded plus spent in the whole of the euro-zone. EUR/USD took a big hit as soon as the referendum date was confirmed. Its hard to think of a currency linked to the GDP of an economic union getting stronger when one of its best component economies has just departed.

Not if dragging / lagging countries like the UK and Greece exit and core members remain making the union stronger.
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Old Mar 5, 2016, 11:09pm   #20
 
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Originally Posted by tomorton View Post
The pound will recover if it becomes clear to the market the referendum is going to be a stay in result and/or if the pound has simply reached a technical level that's good for the big players to buy in at for the long term. These points could be well before the referendum date, the results will already be price in by the time the count starts. Meantime, uncertainty makes it a sell.

Yes, the euro is strongly coupled to the pound and to London. I believe that more euros are traded in London per day than traded plus spent in the whole of the euro-zone. EUR/USD took a big hit as soon as the referendum date was confirmed. Its hard to think of a currency linked to the GDP of an economic union getting stronger when one of its best component economies has just departed.
I agree with you. The UK is one of the biggest component economies in the EU. The EU will lose a huge chunk of revenue, if it leaves. What hurts one of the countries, hurts them all. 80% of Greek imports are from the UK. This means that they are essentially getting those items at a discount because they are both members in the EU. If the UK leaves, it will become more expensive for Greece. When Greece is hurting financially, the Euro Zone will hurt financially.

The UK and Germany are the only two economies in the EU that matter. Even if the UK's economy and currency drop a little, I believe in the long term, they both will stabilize. However, this cannot be said for the EU if the UK leaves.

By non-EU currencies, I was referring to the Norwegian Krone, the British Pound (if it leaves), The USD and to some extent the Swiss Franc. Norway has never had any of the supposed advantages of trade within the EU because they are not in the EU. Their economy will weather the storm just fine. They have plenty of natural resources, namely oil.

I hope and foresee the UK leaves the EU. In that event, the NOK should soar relative to the euro. I expect the GBP to plummet from the exit, creating an amazing buying opportunity for when the British economy finds its feet and soars to new heights without the lead anchor that is the EU.
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Old Mar 7, 2016, 8:51pm   #21
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I believe if Britain leaves the EU the pound and the EUR will both bottom out from the initial shock, but then I believe both currencies will eventually recover. One of my chief concerns however would be that the pound would have a slower recovery due to uncertainty of the economy and free trade agreements with the rest of the world all of which would have to be renegotiated which could take years. Further uncertainty would likely cause the pound to depreciate due to the fact that in the event of a Brexit. It is also likely that the UK would break up into the United Kingdom of England, Wales and Northern Ireland and the Kingdom of Scotland. Still under the same monarch strangely enough, so these uncertainties would potential destroy the value of the pound. All that said I would go with the bookies.
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Old Mar 7, 2016, 9:52pm   #22
 
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Originally Posted by GeneFX View Post
I believe if Britain leaves the EU the pound and the EUR will both bottom out from the initial shock, but then I believe both currencies will eventually recover. One of my chief concerns however would be that the pound would have a slower recovery due to uncertainty of the economy and free trade agreements with the rest of the world all of which would have to be renegotiated which could take years. Further uncertainty would likely cause the pound to depreciate due to the fact that in the event of a Brexit. It is also likely that the UK would break up into the United Kingdom of England, Wales and Northern Ireland and the Kingdom of Scotland. Still under the same monarch strangely enough, so these uncertainties would potential destroy the value of the pound. All that said I would go with the bookies.

EU GDP = $14 Trillion (2014)
UK GDP = $2.7 Trillion (2013)

Either way, why hold sterling when one can hold Euros???

Any laggards leaving the Euro will only strengthen the remaining existing countries commitment and the Euro.

Why hold small countries currency that has uncertainty and risk associated with it compared to more widely accepted currency??? This is a no brainer but the exit camp may argue otherwise. Lot of hot air imo. Some people simply do not understand currencies.

Fact! USD and Euros accepted by much bigger block of countries and thus inherently less risky.

Euro holds 1.10, sterling has sunk to 1.39 at the hint of a possible brexit vote. Will sink even more if it ever happens for real. Market has stated already stated the outcome from a Brexit vote. What others say about sterling strengthening and UK doing better is wishful thinking and just pure hyperbole.
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Old Apr 16, 2016, 9:24pm   #23
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Originally Posted by mike. View Post
Imo, dont leave it to guesswork, 2 separate s/b accounts with tight spreads and guaranteed stops, set stops at a decent distance and calculate total exposure should price bounce off both, this is your worst case scinario...then long eur/gbp with one account and short the other account, got to be looking at a 100 + pip move on the result announcement....
is guaranted stop neccesary because of possible slippage? i wonder what would stop be like 30 point 5 min before the results? its long time to go to prepare strategy, but has to be good one though-
thanks.

Last edited by dolphie; Apr 16, 2016 at 9:32pm.
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Old Apr 17, 2016, 7:57am   #24
 
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Originally Posted by mike. View Post
Imo, dont leave it to guesswork, 2 separate s/b accounts with tight spreads and guaranteed stops, set stops at a decent distance and calculate total exposure should price bounce off both, this is your worst case scinario...then long eur/gbp with one account and short the other account, got to be looking at a 100 + pip move on the result announcement....
Think you have a winning strategy here.
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