Could a Second Referendum Fuel the Price of GBP?

Could a Second Referendum Fuel the Price of GBP?

The European Commission president has made it very clear that the EU is not willing or able to modify the UK’s existing exit deal, leaving the British prime minister stuck between a rock and a hard Brexit. This is now fueling speculation about the possibility of a second referendum.

"The Withdrawal Agreement will not be renegotiated."

Jean-Claude Juncker

Furthermore, it seems highly unlikely that the House of Commons would consider reversing their record-breaking Brexit vote of 432 over 202, which constituted an overwhelming rejection of May’s deal.

At this point, there seems to be no viable solution to the impasse, which raises the question, is Brexit still good for the United Kingdom? Was it ever? Trading GBP might be a good option to hedge or profit from Brexit sentiment, but what about the long-term future of sterling?

Opposition towards Brexit on the rise

Crowds gather in front of the UK’s Parliament building to protest over Brexit every day, and attendance is rising. Meanwhile, inside parliament, leader of the Labour Party Jeremy Corbyn and a total of 71 Labour MPs have already declared their support for a second referendum. Leaders of the Scottish National Party (SNP), Plaid Cymru of Wales, the Liberal Democrats, and even the Green party are all calling for a second referendum, now aptly named the "People's Vote”.

2nd referendum being called for by the public
The British public is seeing what Brexit really means and a second referendum is no longer an impossibility.

Former chief of the World Trade Organization Pascal Lamy was quoted as saying that a second referendum "is now an option". More recently, in a letter published by The Times, 130 industry leaders urged the political leadership to support a “People's Vote”. Despite this rally of second referendum support, Theresa May seems unwavering as she struggles to forge ahead with her EU break off plan.

“Let us not break faith with the British people by trying to stage another referendum.”

Theresa May

But do the UK citizens really want Brexit?

In 2016, May announced her plan to leave the EU. In an almost Trump-style campaign, the British people were exposed to the suggestion that Europe’s jobless were flooding into the UK, burdening the economy, and taking jobs from Brits. On June 23, the referendum was held, and the word “Brexit” began to circulate in the financial and political worlds. The British public had spoken. Or had they?

There are currently 66 million people living in the UK; 53 million of them are old enough to vote, but only 28 million people actually participated in the Brexit referendum. Furthermore, it wasn’t exactly a landslide vote, with 53.4% supporting the exit vs 46.6% favoring a continued EU membership.

In other words, only around one in every four people living in the UK actually voted to leave the European Union. Moreover, it is very possible that those who favored Brexit at that time didn’t really realise the consequences of the UK leaving the EU, but they probably do now. Would they make the same choice if given the chance to vote again?

May’s reluctance to hold a second referendum continues to baffle many in the British parliament, the EU Council, and the world media. The mere idea of Brexit has already greatly damaged GBP, with financial leaders — both governmental and entrepreneurial —  fervently warning of an economic collapse if a deal is not successfully negotiated and approved by parliament. With the countdown to the UK’s exit on 29 March well underway, the pressure is mounting.

What would a second referendum mean for the UK economy?

A delay or abandonment of Brexit could restore GBP’s standing in the world’s currency markets, which would likely prompt new investment in the UK economy. GBP traders could quickly see a rise in the price of the British pound sterling as market sentiment becomes more positive.

During the highs of 2007, GBP was worth 2.07 USD, until the global financial crisis provoked a crash. When the dust had finally settled, GBP had fallen into the $1.50 - $1.60 range. Then prices went from bad to worse. After the Brexit announcement, GBP dropped to a record low of $1.22, and it hasn’t really recovered since then. Returning to a $2+ price is highly unlikely, but a bounce back to the 2016 range is not inconceivable and could happen quickly.

What do currency traders think about Brexit?

Currency traders have the option to either buy or sell GBP. If Brexit fears continue and the pound falls further, a SELL order would generate profit. If a 2nd referendum is announced and GBP rises, a Buy order would be the favorable option. Having the choice means traders can benefit from GBP, no matter what happens.

Those in the financial world are keeping a close eye on Brexit developments. If the support for a second referendum continues to grow, there might still be hope for GBP.

Start trading GBP today and take advantage of Brexit volatility.

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Step 1: Getting registered

It's very easy to open an account with Exness. Click here to open the sign-up page in a new tab. If you want to get everything done in the next 10 minutes, be sure to have a credit card, ID, and, proof of address by your side. You can choose to open a demo account without these things. Either way, everything you need to know is here in this two-minute video. Pause the video as you go through the first three steps.

Tip: Account type depends on the amount you wish to deposit. Leverage is effectively an interest-free loan that the broker offers. It allows you to make a large investment from a small deposit. If you are looking for high profit with high risk, a higher leverage might be right for you. If you prefer slow-burning safety with lower results, then keep your leverage low. You can never lose more than you have, but higher leverage means faster results... both good and bad.

Step 2: Prove who you are

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Step 3: how to get access to the market

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Step 4: making a trade

As a default, the top currency pair on the list will have an open chart. Right click on the chart and select the “close” option.

As a professional trader, selecting the right pair requires some research. For a first-time test, any pair will be sufficient. Drag a pair from the list of currencies on the left side of the trading terminal. The old saying goes, “what goes up, must come down.” Obviously, this principle goes the other way too. Your mission is to find a moment when the price direction is going to swing or reverse. If you feel the price is about to go up (bullish), then BUY, if it looks like it’s been trading high and the price has started a downward (bearish) trend, then SELL.

Open a trade

There are many ways to open your trade. You can select from the buy and sell options on the top left of the chart. Preferably, double-click the currency pair on the list. Right click on the chart when you’re ready to make your first trade. Time to set the volume depending on how confident you are in the direction you are forecasting. This is the perfect time to set your stop loss and take profit. Click the arrow to the right of the stop loss and take profit prices.

Note how the blue and dark red lines in the popup graph sit above and below the buy(ask) and sell(bid) price. In the example, we traded long (buy) and got a message confirming the order was successful. If you get an error, your volume was too high for your balance, or your stop loss/take profit was too close to the spread. Remember, every order starts as a negative because of the spread. Be patient. Your take profit will activate when the time is right, and your stop loss is protecting you. To close an order, you have three options. Click the X on the right or right-click the order. If you double click the order, you can close or modify the order.

Congratulations!

You now know how to make a trade. Forex trading can be an exciting way to spend your free time, and you'll actually learn some real-world skills that will serve you well throughout your lifetime. Be patient, learn, and who knows, you might one day be one of the lucky few full-time traders. How will you spend your day?

 

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