ADS Securities chief tells clients to steer clear of UK pound until after referendum

The British pound dropped in February as much as 6 per cent year-to-date versus the dollar, but has regained many of those losses in recent weeks as concerns over an exit recede.

The chief executive of ADS Securities, the biggest UAE-based forex brokerage, said that he would advise clients to avoid trading the British pound until after a referendum next month that will keep the UK in the European Union or take it out.

The British pound dropped by as much as 6 per cent in the first two months of the year versus the US dollar but has regained many of those losses in recent weeks as concerns over an exit recede. Britons vote on June 23 to decide the kingdom’s fate in the EU.

“The impact can go both ways for investors,” said Philippe Ghanem, the chief executive. “They have to be extremely cautious … I would not play the trade. I would prefer to stay away because the volatility on that trade specifically can hurt a strategic investor. So it’s better in my opinion to wait because that kind of volatility can hurt any type of investor.”

The British pound’s decline also comes amid a weakening of the US dollar against a basket of global currencies. Traders are betting that the US Federal Reserve won’t be in a rush to make big interest rate hikes this year amid slowing global growth. Speculation that the Fed would raise rates in the past couple of years led to the dollar reaching multiyear highs. Since the beginning of the year, the Bloomberg dollar index, a benchmark that measures the greenback against a basket of the world’s major currencies, has slipped by 6.4 per cent.

Mr Ghanem said, however, that the US economy is in good shape and that investors should not discount further rate hikes this year following December’s increase.

“The game is not done,” he said. “It doesn’t mean that they will not increase rates. America is doing pretty well and Europe is recovering gradually. So we’ve seen growth in the euro recently. We have to see carefully if the Fed increases rates or not.”

The chief executive was speaking on the sidelines of an ADS event to launch what the company said is the first multi-asset trading smartphone application that has Arabic among its operating languages. The company said its Orex Mobile application allows users to trade more than 90 currency pairs as well as financial derivatives.

ADS Securities was established in 2011 with US$400 million in capital to attract customers seeking to trade between the closing of markets in Europe and the opening of markets in Asia. As well as Abu Dhabi, it also has offices in London and Singapore.

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