The Brexit Vote Looks Likely to be a Bremain Vote and the GBP is Surging
On Thursday, 23 June, history will be made when Britons go to the polls and cast their ballots in the Brexit referendum. The GBP has writhed in recent times leading up to the vote, with various polls suggesting that Britain will vote to break from the EU in the most spectacular fashion. However, the GBP/USD currency pair posted its strongest gains in 8 years recently when the sterling hit its straps on the currency markets. The pound is front and center when it comes to implied volatility, geopolitical uncertainty relating to the vote, and the focal point of global speculative action.
While the polls have been whipsawing in either direction, the ascendancy appeared to be going with the Brexiteers. Now however, we know different because there is a growing body of evidence suggesting that the UK will vote to remain in the EU for the foreseeable future. The 28-nation bloc will likely remain 28 nations on Thursday, and this bodes well for global equities markets, the GBP and worldwide sentiment. Of course, the natural fall guy in this equation is gold. When UK parliamentarian Jo Cox was murdered, campaigning was stopped across the board from Labour to Conservatives and everyone in between. But the big news of the day on Monday, 20 June was the incredible rally of the GBP as it reached $1.47 to the greenback.
Major Rebound in Equities Performance
The 2% rise in the value of the GBP is unheard of for a currency of that stature. Previously, market analysts were giving the probability of a Brexit a 50-50 split. Now however there appears to be a 75% chance of a Bremain vote and a 25% chance of a Brexit vote. Markets are not sold on the latest polls however; they only react to them temporarily. If the upcoming polling indicates a shift towards the Brexit camp, market volatility will once again increase and sharp selloffs of equities will take place. The GBP will also come under renewed pressure ahead of the Brexit vote. For now, equities markets are rallying as evidenced by the sharp uptick on Wall Street and across Europe.
The Dow Jones Industrial Average gained 1.01% in the late afternoon session and was trading at 17,853.53. The S&P 500 index gained 0.98% to close at 2,091.45, and the NASDAQ composite index gained 1.07% to close at 4,851.91. In Europe, the EuroStoxx50 PR gained 3.29% in a massive rally of 93.71 points to close at 2,942.88. The FTSE 100 index recorded an incredible day on the markets with a gain of 3.04%, or 182.91 points, to close at 6,204. The Spanish IBEX 35 index gained 3.41% to close at 8,647.10. In Germany, the DAX surged by 3.43% or 330.66 points to close at 9,962.02, and the French CAC index gained 3.50% to close at 4,340.76.
Numbers Remain Uncertain as Brexit Looms Large
Such is the positive sentiment about the likelihood of a Bremain vote prevailing, that pundits at top spread betting companies are seeing a shift in wagers from the pro-Brexit camp to the pro-Bremain camp. And since spread betting companies are a lot more credible in terms of market perception – since real money is changing hands – many analysts are also looking to the spread betting markets for information on the likely outcome of the upcoming vote. The latest poll from the Financial Times has the vote split at 44% apiece, but recent volatility has made it difficult to gauge sentiment with any degree of accuracy.
About Brett Chatz
Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. Nowadays Brett contributes from his vast expertise in online trading for spreadbettingreview.co.uk.