Europe's foreign exchange traders plan all night stint on EU vote

David Marsh, managing director and co-founder of OMFIF, a research and advisory group in London, said sterling is expected to rise momentarily on Friday if Britain votes to remain in the EU, but this may not last for long since much of the anticipated polling is already reflected in the price. And currency markets' interest in the pound could start to diminish next week when more challenges concerning Europe emerge.

Marsh said, in volatile trading, traders can potentially make profits from their trades from the past week. He said the pound has already appreciated significantly during the past few days on expectations that Britain will stay in the EU and that the pound is probably over-valued. Some traders are likely to exit their positions quickly to secure a profit.

Because the London market will be closed overnight, Marsh said his team will deliver their decisions on when to buy and sell currency to colleagues in Tokyo where they can start foreign exchange trading from 2 am London time. This process will continue throughout the night as more and more results are released.

Marsh said the referendum vote is a significant event in terms of scale of impact on the foreign exchange market and its impact on sterling could be larger than from the last general election in 2015. However, this impact will probably peter out after a short time because currency market operators have very short horizons.

In addition to sterling's short-term volatility after the result is released on Friday, sterling's long-term stability will also be affected.

Laurel Zhang, head of the China and Far East Desk at the London based law firm Sherrards Solicitors, said the prospect of the UK leaving the EU could push up the dollar but the pound will likely fall, given the resulting uncertainty and economic shock.

"As a result, Chinese investors with a positive view of the future of the UK may see this fall as an opportunity to buy out. However, many investors, especially high-net-worth individuals, may decide not to invest as much as they had originally planned, or even not to invest at all," said Zhang.

Elic Sun, vice-president of client relations in China at easyMarkets, added that a weaker pound may offer more investment opportunities for Chinese investors.

To contact the reporter: cecily.liu@mail.chinadailyuk.com

Editor: Chris Peterso