Michael Braun, director at Commerzbank, discusses the outlook for sterling/euro currency spot rates under various Brexit scenarios, and what can be learned from previous market movements.
In the run-up to the 2016 UK Brexit referendum, volatility rose sharply, with a similar impact on risk reversals. Liquidity in the options market shrank, bid-offer spreads widened and it was more difficult to buy larger volume in the sterling/euro options market.
While it is difficult to predict what will happen in the months ahead, Braun believes European corporates should be aware of the impact of volatility as the March 2019 deadline approaches. Treasurers should be mindful of timing to manage market risk effectively, he says.
01:21 Outlook for sterling/euro spot rate
02:30 Impact on hedging transactions
03:00 Volatility movements in the run-up to the 2016 referendum
05:40 What Europe’s corporates should be aware of
Interview conducted by Philip Harding, contributing editor, Risk.net