Sterling has dropped to new seven year low today as traders and investors run to protect against the massive downside that may arise from the referendum, if Britons vote to leave European Union.

Implied volatility (IV) curve that has been inverted for quite some time now, got further inverted today as investors run to options market to protect against the volatility. Six month's IV is now trading at 13.5%, which was just around 12%, two days back. Rise in risk reversals suggest, investors are much more worried over the downside in Sterling.

Testifying before treasury committee, BOE governor Mark Carney said, that the bank is closely monitoring signs of economic malice that may arise from sterling volatility.

Pound has been the biggest loser against Yen. This month so far, Pound has erased 2000 pips against Yen, which tends to benefit from uncertainty.

We are expecting Pound to decline to 1.378 in the very near term against Dollar, before some profit booking can begin to take place.

Pound is currently trading at 1.392 against Dollar.