ThinkForex, a leading multi-asset provider of global derivatives trading will be increasing its margin requirements for sterling denominated currency contracts in anticipation of increased volatility during the UK’s vote on its relationship with the European Union.
The EU referendum will take place on the 23 of June 2016 and is expected to impact global financial markets such as the pound and FTSE 100. The London-based broker has reported that it will increase margins on all GBP crosses and the UK stock index to 5 per cent.
Nauman Anees CEO and co-founder of ThinkForex, says: “Back in January the decision of the Swiss National Bank to stop pegging the Swiss France to the Euro was a wake-up call for traders and the revised margins are in the best interest of our clients.”
The margin changes will come into play from market open Sunday the 19 June till rollover on Monday 27th 2016, however if volatility continues the changes maybe be extended.
The EU Referendum has been a key talking point in British politics with opinions swinging on both sides of the fence. All eyes are on the impact of the vote on the world’s fifth largest economy, with the EU being one of the UK’s largest trading partners according to World Bank, with figures showing over 44 per cent of UK exports being accounted for in the European Union.
Trading activity in financial markets is expected to increase during the referendum as traders anticipate volatility and market moves.
Naeem Aslam ThinkForex’s chief Market Analyst, says: “Investors are frightened of the unknown which is a concern in itself. Brexit qualms have increased the anxiety amid traders and recent polls which are indicating that the Leave group are gaining the lead is adding fuel to the fire.
“Traders want to take advantage of this increase in volatility but at the same time they don’t want to get burnt either. Brexit threat is so stark that it has pushed the volatility of Sterling to a level which is not cited since the subprime mortgage crisis.”
The EU Referendum vote could impact London’s positions as the world’s financial capital if the results swing to the exit, with over 40 per cent of FX trading volumes a Brexit could see other centres such as New York or Tokyo take pole position as dominant FX hubs.
ThinkForex believes that results will remain in favour of the UK staying in the EU, Aslam adds: “Our house view is that there will be no Brexit however, if the polls are correct and Brexit does take place, there may be a heavy punishment for the GBP. We think that Sterling could fall all the way to 1.29 level against the dollar. However, if there is no Brexit, the currency could bounce to 1.60.”
