If Britain votes to leave the European Union on Thursday, it won’t just affect the pound and the euro. A Brexit would throw the entire foreign exchange market into a tailspin, hitting safe-haven currencies like the Swiss franc and the Japanese yen particularly hard.
Experts anticipate significant volatility. Nick Parsons, lead investment strategist at the National Australia Bank, predicts a repetition of Black Wednesday, when the British pound was forced out of the European Exchange Rate Mechanism in 1992 because it lost 4.3 percent of its value.
Sören Hettler, an analyst at DZ Bank, warned against being taken in by the relative calm before the storm.
“The rates on the foreign exchange market do not adequately reflect the risk of a British exit from the European Union,” Mr. Hettler told WirtschaftsWoche, Handelsblatt’s sister publication. As a consequence, there’s danger of considerable volatility, he said.
Goldman Sachs has forecast an 11 percent drop in the value of the pound compared to a basket of currencies from other industrial economies. Back in February, Goldman predicted a 20 percent decline. Columbia Threadneedle has forecast a 12 percent drop.