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May 31, 2016

What impact will a vote for Britain to leave the UK have on the global markets?

What impact will a vote for Britain to leave the UK have on the global markets?

In less than a months’ time, the United Kingdom will hold a key referendum to decide if the country will stay in the European Union or not. How should you be positioning yourself in the market to maximise the profit potential from the vote and its outcome.

Most traders will move into the US Dollar in anticipation that the Pound will weaken. It could also create a large amount of pressure on the Euro. If the UK leaves the EU the next question is going to be who is going to be next?  The safe haven trade will be to the US Dollar.

Longer-term trends also favour buying the US Dollar against the British Pound as the British currency has been slipping over the past few years. The pound's been making lower highs since 2014. On a technical analysis basis it is still below a falling 200-day moving average. Before the GBP stabilises we could see a play breakdown of 30-year support to below $1.40.

Away from the impact a “Brexit” will have on the currency markets it could badly damage global markets, especially since the UK could set a precedent for other European countries to follow. It would be disastrous on many level and could create chaos the likes of which we have not seen in decades. If the UK leaves, they open the way for the other countries that have thought about leaving to follow suit. The UK would unravel the whole European Union by single action.

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