The relation between Sterling and Forex has taken a pause after it grew for some time, banking on hopes created by the Bremain situation. The British pound has eased back against the US dollar today. This is after it posted a large gain as compared to last 7 years when Britain decided to stay back and be part of the European Union. If you are wondering how much sentiment play a role in forex markets, this should give you a fair idea on how sentiments rule the highs and lows besides pure statistics and economic decisions.
The effect on the UK’s decision to stay or opt out of EU affects trading decisions.
Bremain sentiments affect the markets
There were opinion polls run on Monday where it showed that the camp in favor of Britain staying with the Union had covered some grounds in the debate that has been ensuing about the European Union and Britain referendum. The probability for Britain to stay with the Union rose to 78 percent as per the vote that came in on Thursday. This was in contrast to the same vote falling to a low figure of 60 percent last Thursday. These were the odds that were gathered by the gaming website called Betfair. The movement of the foreign currencies has been accordingly. For instance, the British pound eased up about 0.1 percent in the Asian markets, which pulled back from a high figure that was set on Monday. It has risen again on Monday by 2.1 percent, which has been a big gain in a single day, a feat that has occurred in the forex markets last in 2008. The Influence On World Events In Forex Trading are Discussed Here.
As per these movements, it is apparent that the market is reacting to every change in opinion polls. The market in general has been witnessing a choppy trading scenario as there are big decisions that are yet to be taken. Hence, trading in options is yet to see considerable changes in pattern. This is as per the currency pair and the band that it has been tested for since May. If there is a break of the levels of $1.47-48 band it would lead to short covering trends in the British pound. Traders are of the opinion that any break in the band or pattern would come only when the results are released of the referendum discussions. Hence, one could see more ups and downs in the trading patterns till concrete results are known. These are of the opinions of currency strategists in Tokyo. However, the latest swings have been in favor of UK remaining in the European Union. The actual results of the vote will reach Asian markets by Friday morning and hence, sharp changes in trading patterns will come by after that.
Volatility and predictions
It is implied that pound options remain volatile. Many investors feel that this indicates that the Leave camp is having diminishing probability. The volatility that lasted for three months has stood at an average of 13.3 percent. Last week it was especially high at 18.5 percent. The Euro has been down, but it rose about 0.5 percent against the sterling. It also rose against the dollar by 0.1 percent.