Anyone  who has had an eye on the Sterling – Euros exchange rate over the course of 2016 will have seen the rollercoaster ride players in the market have been subject to with the exchange rate rising and falling by as much as ten cents! Undoubtedly the EU referendum concerns are having the most notable impact on these movements and this will clearly be the case as we approach the 23rd June and, depending on the outcome, the days after the referendum as the markets digest the outcome. Other factors such as last Friday’s 12 month inflation forecast from the Bank of England (BoE) will no doubt also give rise to GBP/EUR fluctuations but the main driver will be the referendum (lower inflation expect a lower Pound – in fact it came in quite positively but not enough to boost Sterling from the Brexit worries!)

But what really are the risks for Sterling based buyers of Mallorca / Spanish property? Will there be a fundamental fall in the value of Sterling with respect to the Euro should BREXIT win the day or might in fact Sterling be the winner?

One thing for sure with just two weeks until the UK votes on whether or not to remain in the European Union, expect volatility with traders pricing in the highest one-month implied volatility since 2009 (Lehman Brothers and all that funny business!!).

Over the past few weeks poll results have alternated between having the ‘remain’ and ‘leave’ camps ahead, causing the GBP/EUR exchange rate to fluctuate between 1.32 and 1.25. While just in the past few days the Pound has fluctuated wildly with, for example, Sterling falling by as much as -1.1% after opinion polls suggested that the ‘leave’ campaign will be victorious on June 23 only for it to bounce back again afterwards – the following day saw Sterling rise as much as 1.5% in response to a different poll.

With the majority of economists, organisations, businesses and banks suggesting that voting in favour of staying in the EU is more beneficial to the economy, any sign that ‘Brexit’ is taking the lead causes GBP exchange rates to suffer.

Most analysts predict that the initial shock of a ‘Brexit’ will cause the Pound to shed significant value. However, most experts also concede that the impact on the Pound will probably be temporary.

In fact there are very strong arguments to suggest that the UK leaving the EU will have a greater downside impact on the Euro based on a fear of further “disintegration” when all the talk a year or so back was of greater “integration”!

For the moment the Euro doesn’t seem to be suffering from that threat perhaps because the Euro is already holding a comparatively weak position as ECB President Mario Draghi continues with his  massive programme of quantitative easing, something that is likely to continue and possibly increase further in the months ahead.

So while volatility is likely to continue in the short term there are arguments to suggest that come what may on the 23rd Sterling could well bounce back with there being greater problems in the Euro Zone than in the UK.