A global bonds selloff has pushed yields up across the board towards post-Brexit highs while the anti-establishment wave sweeping the western world could force a 'No' vote on the Italian referendum in December.
Article / 23 June 2016 at 7:58 GMT

FX Update: Brejoice – the wait is nearly over

Head of FX Strategy / Saxo Bank
  • Take note if regional UK results are not the expected ones
  • Outlook is for tremendous FX volatility should Leave win
  • Whoever wins, GBPJPY & GBPUSD would be highest volatility pairs 
  • A Brexit would trigger existential test for the European Union
  • Polls continue to show a near dead heat, turnout impossible to predict
By John J Hardy

The wait is nearly over as today, the UK votes and results begin rolling in starting at midnight British Standard Time, (currently GMT +1), but the more populated areas starting at 0030 and with a result quite clear (assuming we’re not on a knife’s edge) by 0230 GMT. See this link for more thorough details of the regions’ expected reporting times as well as, importantly, the leanings of each region, as heavily skewed results relative to expectations for early key regions could see the market running away with a conclusion before the bulk of the vote is in. 

Final, final thoughts on potential outcome:

As covered in yesterday’s FX Board, the reaction potential is highly skewed to more volatility in the event the Brexit vote prevails over Bremain. The highest volatility pairs in either scenario are assumed to be GBPJPY first and foremost (a 10% move is a rough guess, meaning 140 versus current 155) and GBPUSD (1.38 to 1.35 on the initial reaction versus 1.48 seen overnight). It appears that euro pairs are taking on a lower beta to the referendum, as is appropriate, as a Brexit vote immediately sets the clock to ticking on the next existential test for the EU. In other words, the euro’s vulnerability to a massive drop in sterling may have become higher than it was in the run-up to the referendum – meaning muted upside potential for EURGBP in a Brexit scenario.

In the event of the favoured Bremain vote, we could see EURUSD testing above 1.1500 and GBPUSD toward 1.52-1.53, with these representing very interesting levels for longer-term USD bulls to get involved in both pairs.


GBPUSD squeezing above the range highs and taking out stops, likely a squeeze on positioning/stops ahead of the actual outcome rather than due to any new polling or other developments. The polls continue to show a near dead heat, with no one able to indicate likely voter turnout. It’s hard to believe that the squeeze that took out the highs will continue through today’s nervous waiting period. Note the big Fibo level up at 1.5130 if GBPUSD is running away to the upside in a Bremain scenario.

 Source: Saxo Bank

The G10 rundown

USD – safe haven in Brexit, but Bremain would likely see a weaker USD, particularly against risky/commodity currencies. Looking at overexuberance in GBPUSD and EURUSD rallies to serve as attractive long term structural area to get short.

EUR – Considerable beta to UK referendum vote, as a Brexit vote would swing the spotlight quickly to the next existential issues facing the EU, like the Italian referendum later this year, Spanish elections upcoming, French elections next year, etc..

JPY – Yen reaction assumed to have highest beta to UK referendum opposite sterling’s strength or weakness.

GBP – The reaction potential is highly asymmetric after the recent run-up in sterling into the referendum, as discussed above.

CHF – Assumed to have high beta to referendum vote (franc strength on a Brexit), if less high than JPY or perhaps even USD.

AUD – AUDUSD pushing up against important pivot zone ahead of the UK referendum vote – a swing and close above the 0.7575/0.7600 level.

CAD – Underlying weakness here quite clear, given the action elsewhere. Interesting to see how market treats USDCAD once the UK referendum distraction is past.

NZD – Incredibly attractive long term levels to get short NZDUSD, but hard to tell whether we risk a further squeeze to 0.7500 on a post-Bremain melt-up scenario first. Note that 0.7230 is a major Fibo retracement level.

SEK – Low beta trade to UK referendum with SEK correlated with risk appetite, is the assumption.

NOK – Watching Norges Bank today with little in the way of expectations, but market reaction will be buffeted by UK referendum.

Upcoming Economic Calendar Highlights (all times GMT)
  • 0645 - 0800 – Euro Zone Flash PMI 
  • 0800 – Norway Norges Bank Deposit Rate 
  • 1230 – US Weekly Initial Jobless Claims 
  • 1345 – US Jun. Preliminary Markit Manufacturing PMI 
  • 1400 – US May New Home Sales 
  • 2300 – US Fed’s Kaplan out Speaking 
  • 2330 – 0230: Key portion of UK Referendum results rolling in. 

– Edited by Clare MacCarthy


John J Hardy is head of FX strategy at Saxo Bank


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail