• Bank says pound may fall as much as 11% after a Brexit
  • One-week pound-dollar volatility rose to a record on Friday

Britain’s European Union referendum next week will cause sharp markets swings whatever the result, according to Goldman Sachs Group Inc.

The U.S. bank is warning clients that volatility will continue regardless of whether the country votes to remain or leave the EU. adding that, while it is “fairly confident” of the direction of currencies under difference scenarios, assessing the size of the moves is more difficult.

A measure of pound-dollar volatility expiring in one week surged to the highest level on record Friday, a sign of market’s uncertainty over the outcome of the June 23 vote. Societe Generale SA is also foreseeing heightened price swings, telling clients that its ability to provide the usual levels of currency liquidity and pricing could be constrained during the vote, according to a memo seen by Bloomberg.

“Asset prices are likely to move sharply regardless of the outcome of the referendum,” Silvia Ardagna, a London-based currency strategist at Goldman Sachs, wrote in a note dated Friday. “It is difficult to assess at this stage how large and persistent the shock will be and how much the price action will be affected by positioning and market liquidity. Sentiment could turn very negative if worries around systemic risk build up.”

The pound may fall about 11 percent in trade-weighted terms if a vote to exit leaves financial markets in a similar state of uncertainty to that seen after Lehman Brothers Holdings Inc. collapsed, Goldman Sachs analysts wrote in an earlier note on June 15. The forecast, based on modeling a shock calibrated to match the period after Lehman, also showed that the euro may weaken about 4 percent in this scenario versus a basket of currencies, with the yen as the biggest outperformer, with a projected 14 percent gain.

The pound was at $1.4287 as of 3:32 p.m. in London on Friday, after touching $1.4013 on Thursday, the lowest since April. The referendum campaign is currently on hold after the murder of British lawmaker Jo Cox on Thursday.

Recent currency calls by Goldman Sachs analysts have been caught out by the unpredictability of price swings so far this year. In May, the bank was one of a number that abandoned their calls for the euro to reach parity with the dollar by the end of the year. The same month it also changed its forecast for the yen, saying that the currency was likely to strengthen until the Bank of Japan rolls out or signals additional stimulus, replacing an April 24 call for the yen to drop.

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