For the top currency forecaster of the past quarter, the next three months will be all about the looming vote on Britain’s membership in the European Union.

Not only will the “Brexit” debate weigh on the pound, it will also wipe out the euro’s biggest quarterly advance in five years, according to Bayerische Landesbank. The German lender topped Bloomberg’s major-currency rankings for a second consecutive quarter by successfully predicting the euro’s fortunes versus peers including the yen, Swiss franc and Swedish krona.

“It’s not a risk just for Britain and the pound but also for the euro,” said Wolfgang Kiener, who compiles Bayern LB’s forecasts with colleague Manuel Andersch from their office in Munich. “It’s hard to call and thus is the biggest risk. Most people hope the British will stay in the EU but no one can be sure because we have refugees, terrorist attacks -- lots of events which could make the British leave.”

With the June 23 referendum drawing closer and events such as the Brussels bombings last month potentially influencing the outcome, strategists are assessing the impact of the debate on the economic bloc as a whole. A U.K. exit from the EU may call into question the European project and inspire referendums in other nations.

David Fuller's view

Eurozone countries have had plenty to worry about since the single currency was launched in 1999 – perpetually weak GDP, high unemployment, a clumsy ratification process when they can vote among what is now an unwieldly 28 countries - the surrender of other sovereign rights to an unelected bureaucracy - an ongoing migrant crisis - terrorist attacks - and now the approaching UK Brexit vote on 23^rd June. 

Some commentators on both sides of the English Channel think a successful vote which takes the UK out of the EU would effectively end efforts to create a ‘United States of Europe’.  I agree and I also think the EU will fail even if the UK votes to remain.  After all, we are not talking about newly formed states created by immigrants.  The EU consists of individual countries, most of which were previously independent and all have hundreds of years of history.  They are not anti-Europe because they would like to trade peacefully with each other.  However, their populations are increasingly anti-EU and that will be very difficult to change.     

See also: Will Britain Leave the EU?