Markets Await UK EU Referendum Outcome

Brexit Vote to End Months of Investor Anxiety

The much awaited date for the vote to decide if the United Kingdom remains in the European Union or leaves has finally come. Polling stations will open at 7:00 am local time in the U.K. (2:00 am EDT) and will close at 10:00 pm (5:00 pm EDT). The two campaigns had a long time to convince voters of their platforms. The strongest points of the Leave campaign were border control and regain sovereign decisions on funds. Remain on the other hand talked about the benefits of trade with the EU which for example created more than 3 million jobs. Surveys on the result have shown the evolution of both campaigns, with Leave gaining a significant boost as the voting date became closer. The tragic shooting of MP Jo Cox might prove to be a deciding factor as it could increase voter turnout and get the voters who are unsure to finally pick a side.

The voter turnout will be know ahead of the final result. There are no exit polls in the UK EU referendum and results will begin to come in as they are available. The final outcome of the referendum is expected at “breakfast time” on Friday morning, which could mean somewhere around 7:00 am (2:00 am EDT) on June 24.

Polls show a too close to call referendum and markets have been volatile as a Brexit is still probable which would cause a severe shock to global markets. The result of the vote will be quickly priced in ahead of the London session open. Central bankers around the world have cited Brexit as a considerable risk and some have delayed their monetary policy decisions until an outcome is known. The GBP has gained after Remain has risen in the latest polls. A Leave win would be felt immediately with a rapid depreciation of the currency. Remain offers more stability to the markets but it hinges on millions of U.K. voters making that choice.



The GBP/USD has gained 3.46 percent in the past week. The pair is trading at 1.4658 after polls showed the Remain camp was making headway. The Bank of England (BoE) kept rates unchanged two weeks ago highlighting the risk of a Brexit which put the currency at the lowest point in two months. Hour later it would all change as MP Jo Cox was attacked calling for a suspension of the campaign for both sides, but turning public opinion against the Leave campaign of which the shooter was a supporter.



The EUR/GBP has lost 2.806 in the last week. The pair is trading at 0.7711. There has been little economic data and nothing has been more important to the market than the Brexit debate as the election approached.

Safe haven assets have come off in the last week as the probability of a Brexit has eased. Gold, USD and JPY appreciated as the Leave campaigned gained on the polls, but were quick to give up gains once those results changed and less volatility hit the market. The global stock market has been optimistic and returned to positive territory as Brexit anxiety dissipates, but still present until a final vote is known.

The GBP will be quick to react to the outcome of the elections. There is limited upside for the currency if Remain wins as that is the most likely scenario and less disruptive for the market overall. A Brexit would impact the global economy and could even trigger a recession in the U.S. as per the Fed Chair Janet Yellen. The economy of the U.K. has slowed down and fundamentals will return to the forefront to guide markets, which do not forecast a strong GBP, but for the time being removing the uncertainty of a potential end of the E.U. would be pound positive in the days after the result is known.

Economic data next week will be sparse with the highlights being the U.S. final GDP figures for Q1 of 2016 and the in the U.K. it will be the trade balance figures. The U.S. non farm payrolls (NFP) will not be published on the first Friday of the month, because it falls on the fist day of the month and will be released instead on July 8 with high anticipation from investors looking for guidance after the UK EU vote referendum outcome.

Market events to watch this week:

Thursday, June 23
ALL DAY UK EU Referendum
8:30am USD Unemployment Claims
Friday, June 24
UK Referendum Results
4:00am EUR German Ifo Business Climate
8:30am USD Core Durable Goods Orders m/m

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza