After months of anticipation the Brexit referendum will finally take place this Thursday. Let’s look at how the markets are reacting
At the end of Friday’s trading session, the pound increased against the U.S. dollar by 0.48% and was trading at $1.43602.
On a weekly basis, the cable increased by 1.2%.
In relation to the euro, the sterling also rose on Friday by 0.4% and ended trading at €1.27385. The euro dropped against the dollar most of last week but saw a sharp rise at the beginning of this one.
Global equities have been rallying leading up to the vote with the footsie opening the week 2.4% higher.
So what led to the pound’s and stocks rally?
The latest polls are showing a greater support to ‘remain’ in Europe at 45% with 42% supporting a ‘leave’ vote. The appalling news of the killing British MP Jo Cox might have shifted market forecasts for a “Remain” result
Jo Cox was in favour of the UK to stick with its EU membership and her murder may have swayed public opinion in line with her position.
Will it all be doom and gloom if the UK votes to leave?
Eurozone policymakers remain divided as to what the implications from a potential Brexit could be for the group and its common currency, the euro. Dutch finance minister and chairman of Eurozone’s group of finance ministers Jeroen Dijsselbloem believes that in case of a Brexit, no major monetary policy changes would be required on a Eurozone level.
However, a number of others including Finland’s finance minister Alexander Stubb, estimate that Brexit would be followed by a financial crisis similar to the one experienced in 2008
The IMF have said a Brexit would have a negative effect on the UK’s labour market and a decrease in wages as well as see fuel prices rise.
We’re in for a busy week for the markets – will it end with a bang or a fizzle? It’s up to the UK public and the world is watching!
