Trading the
eu referendum
With the dreaded referendum around a week away, there is no better time to look at the potential issues that face the markets if Britain does indeed vote to leave the EU, and the sectors to watch out for in that eventuality.
See here for a full explanation of the various ways you can control your risk in the run-up to the referendum. If you are concerned about volatility, remember we also offer a fixed-risk trading product called Speed Markets.
EU REFERENDUM
Indices
Despite the odd rebound, panic truly seems to have set in among the global indices. The EU referendum has come to dominate discussions where once it only lurked at the peripheries, and the reaction hasn’t been pretty, with the markets hitting a bevy of fresh lows. Understandably the European indices have been far worse hit than their US counterparts, though that may change if the results point to a Brexit on the evening of the 23rd June. The most interesting question, however, may not be how far the indices fall in the eventuality of a Brexit, but instead how much do they rise if Britain opts to remain in the EU?
eu referendum
currencies
Given that the main barometer to judge the market’s pre-referendum hitters has been the pound, the currency has proved to be far more resilient that one would have imagined at the turn of the year. Cable has consistently climbed back towards $1.42, even in light of poll upon poll giving Vote Leave the lead. That does, however, leave it with a fair way to fall if a Brexit does occur, analysts expecting GBP/USD to at least clear the $1.384 lows it struck when Boris Johnson revealed he was joining the Leavers back in February.
eu referendum
property sector
While the entire market may be in for a bit of a shock if Vote Leave prevails, there are a few specific sectors that may suffer in the long-term if the Vote Remain doom-mongers prove to be correct. One such sector is the UK property market, with the potential for a notable drop in house prices post-Brexit.
Already sector big boy Berkeley Group Holdings has suffered, seeing forward reservations drop in the second half of its recently ended financial year thanks to a mixture of tax changes and pre-referendum fears. Of course from the Leavers’ perspective this is all phooey, with some experts predicting the UK property sector would see an influx of investors if the country were to leave the EU thanks to the expected sharp fall in sterling.
eu referendum
travel sector
One of the many, many things unclear about a post-Brexit UK is the state of the travel sector. There is a very real chance flight prices could shoot up if Britain leaves the EU, largely thanks to the issues expected to plague the pound, something that will also have a negative effect of Brits’ spending money.
Then there is the potential prospect of visas to travel to Europe, something that may cause a drop in holidaymakers. Already the travel stocks have suffered in the last year and a half, with the litany of international tragedies putting customers off previously key destinations, so one imagines they won’t welcome the sector-specific volatility that could greet a Brexit.
eu referendum
Financial sector
Like with pretty much every aspect of the referendum, opinion is split among the financial sector over the pros and cons of a Brexit. However, the renegotiation of Britain’s access to the single market, and the protracted conversations that will likely lead to, may convince firms to relocate their operations elsewhere, damaging one of the country’s biggest contributors to its GDP. The sense of unease among the financial sector has already been felt in the run-up to the referendum, something that will only increase if Britain sticks two fingers up to Europe on June 23rd.
