This Week's Focus: Brexit, opportunity or risk for the investor?
Friday, 22 of April 2016
This week focus
In just a couple of months we will know whether UK citizens want to continue in the European Union or to leave, what has become known as Brexit in the media.
Polls show a tie, with slight fluctuations, between supporters of stay (Stay) and leaving (Leave), leaving, as usual, are the undecided who end up tilt the outcome toward either side.
Cameron pulse to the EU
The British government of conservative David Cameron, after getting obtained from its European partners to limit the rights of immigrants, a special status within the Union, protect the City, etc., is campaigning to stay in the EU, with the support this week US President Barack Obama. British Conservatives feel the pressure of the UKIP, led by MEP Nigel Farage, very skeptical with the decisions taken at the European Commission and affecting member countries, especially to his detriment of decisiveness scope national.
The thermometer currency
Without going into further appreciations of a political nature, the fact is that the possibility of Brexit, less evident one year a couple of weeks ago, has an impact on financial markets. A good measure of this is the evolution of the exchange rate of the pound sterling (GBP) against the Euro (EUR).
The depreciation of the pound has paralleled the increase of supporters of leaving the EU, reaching its recent low near 0.81 GBP / EUR, where has appreciated again.
In our opinion, unless some unforeseen event with strong emotional impact, such as a terrorist attack or political scandal at European level, the output probability UK EU is low. Therefore, we see opportunity in GBP therefore better level of interest rates and their potential short-term appreciation against the euro. The answer, the know on June 23.