With EU referendum looming, 75% of UK firms trading internationally fear currency volatility

Will there be a referendum on Britain’s continued membership of the European Union, or will it be postponed once again?

Will there be a referendum, but the outcome be a matter of non-consideration by the European Commission or the British government?

These very important geopolitical matters are currently dominating the mainstream and financial news across the United Kingdom, however currency traders could certainly be subjected to a very volatile period across the FX markets in the advent to the proposed referendum, and also in the period subsequent to it.

A survey which was conducted across 1,000 company executives at British firms by commercial payments provider World First has deduced that 75% of companies making cross-border payments expect exchange rate fluctuations to occur as a result of the anticipation and passing of a referendum, whilst 47% of those surveyed are not paying the right amount of attention to FX markets.

World First’s conclusion has been that nearly 50% of the companies which participated in the survey have been caught out by sudden FX rate changes and over 25% have been severely affected by market volatility.

These corporate factors from within British companies which use the Pound as a base currency for their business are very important factors to consider when trading the FX markets, and for FX brokers themselves to manage risk.

In 2015, the average value of an international transfer for a small to medium sized enterprise in Britain was £256,700, which means that the country’s 304,200 small to medium sized businesses had made a total of £78 billion in overseas payments during last year.

It is important to separate the potential of increased prosperity of Britain’s economy should it exit the ailing European Union from the effect that this could immediately have on the currency markets as the difference between the Pound and the Euro will likely fluctuate tremendously during the pre and post referendum period.

FinanceFeeds recently reported that the US dollar could be the steady currency against which to trade a volatile Pound and Euro as this particular event continues to progress.

Direct handlers of FX transactions have also noted this to be an important consideration.

Western Union Business Solutions, the commercial division of money transfer company Western Union deduced that 50% of all small to medium businesses last year had been negatively affected by currency movements, this being a potential precursor of what is to come.