The impact of Brexit vote on trading is still much unknown to many traders both on short term and long term basis. In fact, the effect it can have on their trading for the upcoming weeks is still as great as it could have been in the previous ones.
Britons had their votes casted on June 23rd and it is very much clear that markets will be volatile during the course of the referendum and thereafter especially when the results of the poll is known. In fact, there has been wild swings in the euro, pound and other currencies hence driving banks to sound a warning of impending volatilities that will arise.
The Brexit Referendum
“Brexit” which means British Exit is an established referendum seeking that UK make an exit from the European Union. This was a promise made by David Cameron prior to getting elected as the Prime Minister. He promised that votes will be casted by the whole of the electorate as to whether Britain should remain with the European Union or not.
While there were major effects and impacts on trading have been in the days prior to the referendum, some pretty wild things seemed to occur on the voting day itself- 23rd of June, 2016. Anyone above the age of 18 is eligible to cast a vote provided that they are a national citizen. Yet the question has been whether the UK should remain a member of the European Union or not.
The result of the polls is of great impact to financial markets, even though sterling would experience weakness and there could also be fall in UK stocks. But markets are amazingly changeable and there is no note of assurance on either way.
Citizens in support of the Brexit craves for UK to be independent. The exit of Britain from the common market though has an immense impact on the state of trade which is actually a cogent factor, immigration is also something to worry about. However, the government hopes that Britain would stay so as to guard trade, wages, jobs, market, house prices and lots more.
Nervousness already on Forex Markets
Over the next couple of weeks, there is going to be uncertainties on the state of the market since there will be diverse impacts and reports from news that will be influential on the standpoint from which GDP will be viewed in contrast to other currencies. From most Forex experts and specialists, there has been an assumption or probably a conclusion that in the time leading up to the Brexit referendum, there should be a visible weakening in the British Currency. However, the real decision may not have that so much effect as ones assumption may be. In real sense, market volatility may mean added opportunity but also increased risk. Thus, ETX Capital may be boosting their margin rates on some specific markets so as to reflect the risks coming up from opportunities made available through market volatility
Market volatility means increased opportunity but also more risk.
Tendency of an abrupt drop
As it stands, whenever there is an occurrence of a referendum like this, there is going to be an effect on the markets which is nevertheless inevitable. There is no way going around it. The drop however may be momentous but minor drops are very much unavoidable.
Impacts of similar recent referendum
From recent similar events, we can probably make predictions and assumptions of what the impact of this referendum would be.
Taking a look at that of the Scottish, their referendum took place in 2014 based on the decision as to whether Scotland should become separated as a nation or not. This resulted to a significant drop for closely a month. There was a reduction in the currency by 136% but it afterwards came to normalcy as soon as they settled down again. It’s therefore quite reasonable and considerate to expect something of such this time around as the market tends to bring itself to regulation and normalcy.
If Britain votes to leave the EU
It’s known that stocks would be affected but the question is which stocks could be affected most?
The focus of the impacts of Britain’s exit from the European Union has much been on the economy. Can Brexit possibly lead to gradual growth in economy or probably a stagnation? In actual fact, both sides have solid economic arguments but only a limited number of people would argue that if British exits, there could be a shock for some divisions and sectors
As issued by the Goldman Sachs in a recent statement to clients, the key sectors that could probably be affected most were banking, household wares, property and life insurance. However, much anxiety is upon the financials and the banking sector as Britain’s exit from the EU could seriously leave a setback on London’s claim as Europe’s financial capital. At the height of the matter is that of the issue of “passporting”, which enables financial firms to trade their wares and stocks in each of the 28 member states of the European Union without any different regulatory license or the need to establish foreign subsidiaries as a set up to resolve the issue.
If Brexit should hold, UK based banks and managers may have no option than to relocate their operations and services so as to earn access to EU market. Reliance of banks on mortgage lending may also experience the effects of Brexit if house prices move unobtrusively in respect to predictions made by some commentators.
As regards to property, it has been discovered though clear and glaring that investors are slowing down decisions until after the vote. Warnings were made by many economists that price of houses is very much likely to fall significantly in the event that Britain leaves.
From ETX Capital
ETX Capital made a survey of possible and related measures for the margin necessities for its trading products and they laid emphasis on the fact that there could be significant and unavoidable increase in market volatility resulting from the Brexit vote and how possible alterations to margin and spreads could follow. ETX Capital made it clear to their clients that for those without 100% margins in their accounts, they may probably experience a closure of their account anytime. However, JOE RUNDLE who is the head of Trading at ETX Capital issued a statement of assurance that even though the Brexit Vote is one single and big event happening this year which will in turn have consequential effect on financial market whatever the outcome of the referendum, ETX Capital will be on the move to help all their traders get through the choppy waters and hopefully get the best of the volatility with a clever trading strategy.
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