GBP: Weaker and more volatile ahead of the EU referendum – MUFG

By FXStreet Lee Hardman, Currency Analyst at MUFG, expect the Brexit risk premium to widen further as we move closer to the referendum reinforcing pound weakness and increasing volatility.

Key Quotes

“Brexit risk should increasingly dictate pound performance while other fundamental drivers like BoE policy expectations become more of a side show. The exact timing of the referendum has not yet been finalised but it appears likely to be sooner rather than later after draft proposals were released this week for “a new settlement for the UK within the EU”. The draft proposals will be discussed and fleshed out with the finer details at the special European Council meeting on the 18th and 19th February.

Heightened uncertainty related to the upcoming EU referendum and downside risks to the outlook for global growth are resulting in the BoE displaying an increasingly cautious outlook for monetary policy.”
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Source:: FX Street