Banks’ Favourite Trades Ahead of UK Brexit Vote on June 23

With sterling trades seen too expensive, the yen and Swiss franc are in demand according to in-depth research by news agency Bloomberg.

The UK’s referendum on European Union membership is spurring volatility in the pound, making trading sterling increasingly expensive. Banks are pointing clients toward alternative currency bets or hedges that could fare well regardless of the outcome.

Here is a list of analysts’ favourite trades as written in research notes or recommended in interviews conducted by Bloomberg News in recent days.

Banco Bilbao Vizcaya Argentaria SA

Strategist Roberto Cobo Garcia expects a basket of safe haven currencies including the dollar, the yen and the Swiss franc to benefit the most if the vote is to leave the Union. The bank has been recommending hedging against the risk for the pound by going short on the euro versus the franc.

Bank of America Merrill Lynch

The curve in the euro against the yen is the most inverted at the front end since the financial crisis, according to Christopher Xiao. The strategist said investors expecting the vote to pass without turmoil can take advantage of the curve by selling summer volatility and buying autumn volatility.

BMO Capital Markets

The best trade for Stephen Gallo is to buy euro volatility versus pound volatility, based on the relative price differential in the two securities.

Credit Agricole CIB

Valentin Marinov’s favorite hedge going into the vote is to sell the pound and the euro, and buy gold. Potential central bank easing or intervention may limit gains for the yen and the Swiss franc, the bank’s head of Group-of-10 foreign-exchange strategy said. The euro could suffer from concerns over the growth outlook for the euro zone and more action from the European Central Bank. The dollar’s attractiveness could be limited by a dovish turn in the Federal Reserve’s stance if the U.K. votes to leave, he said.

Goldman Sachs Group Inc.

Betting in a decrease in the value of the pound and the euro against the Swiss franc are both expected to perform well in the event of a “leave” vote, strategists including Silvia Ardagna wrote in a June 7 note. The analysts do not favor selling the pound against the yen given the risk that the Bank of Japan could ease monetary policy further, weakening the currency.

ING Groep NV

Selling the pound against the yen is the cleanest and potentially best-performing trade if the vote is to leave the Union, according to analyst Petr Krpata. He also liked buying the Czech koruna against the Hungarian forint and the Polish zloty ahead of the referendum.

JPMorgan Chase & Co.

The bank expects the spot market to build in a renewed premium going into the vote, and increased its short position in the pound against the yen on June 3, adding to an existing cable put spread, strategists including Paul Meggyesi wrote in note dated June 7.

Morgan Stanley

Strategists including Hans Redeker advise selling the euro against the dollar with a target of 1.08. The idea is based on the view that one month volatility is still not pricing enough downside risk for the euro, they said in a note dated June 13.

Nordea Bank AB

Strategist Aurelija Augulyte likes buying the pound against the dollar and keeping the trade into and after the vote, believing the “Remain” vote will prevail. She expects a possible Bank of England rate increase by year-end or early next year to also work in favor of the trade.


Strategist Shaun Osborne likes buying the yen, either by selling the euro or the pound. He recommends going short on the pound against the yen as an outright bear bet and short the euro against the dollar, as a shock exit would likely spill over into broader euro zone worries.

Societe Generale SA

Going long the Swiss franc against Norway’s krone may be the best trade to hedge against the risk of an exit, according to Kit Juckes, as a decision to leave would be bad for all the higher-beta currencies in Europe including the krone. The strategist said it is too late to implement direct hedges given recent moves in the pound.

UniCredit SpA

Strategist Vasileios Gkionakis continues to favor the yen as the only straightforward hedge against the risk of an exit.

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