Brexit – Things You Need To Know

On Thursday June 23, British voters will choose whether they prefer the United Kingdom to leave or remain in the European Union.

It’s an extraordinary and historic decision due to the significant long term implications for the U.K, Europe and even the world.

Why is the Brexit referendum special?

The British government is asking its citizens for advice on its European and global role.

Leaving the E.U. would lead to an independent but smaller role in European and global affairs.
Staying indicates keeping influence on a more powerful E.U. entity from within, but without full independence.

Both camps offer pros and cons on dozens of factors like commerce, finance, politics, migration, security plus agriculture.

What are the real pros of staying?

The key points of the “stay” camp often refers to positive developments for the economy, trade, European stability and security.
The pro E.U. side highlights that the British economy would be positively impacted if the U.K remains in the E.U. They also:
1. refer to the many jobs connected to the E.U. and high levels of trade.
2. indicate that leaving the E.U. is less beneficial than the leave camp suggests, because the U.K. could lose access to the large neighbouring European markets.

Access can still be reached after Brexit via paying tariffs of course – but with a negative impact on GDP, Or by agreeing to a new E.U. trade deal – but most likely via abiding to E.U. regulations, without influencing them.

What can the Brexit proponents offer?

The “leave” camp point to, among others, the ability to:
1. keep the British Pound.
2. pay no or less E.U. bureaucracy and contributions.
3. control borders and migration.

They also emphasize the loss of democratic control over their own country due to E.U. structures that supersede the importance of national governments and lack control of an electoral system.
The voters in favour of leaving also indicate that they do not expect any serious change within the E.U, regarding its internal regulations and decision making process.

What are the most realistic predictions?

The number of variables is vast and unpredictable, which makes any forecast exceptionally complicated.
The murder of parliament member Jo Cox last week, who opposed Britain’s exit from the European Union, influenced public’s opinion over Brexit debate.

However, some aspects do seem likely such as:
1. Brexit would give the British voter more influence on national policy.
2. a close stay vote would signal E.U. fatigue.
3. negotiations between the U.K. and the E.U regarding a post Brexit cooperation will be complex and tough, but the E.U might have a stronger negotiating position due to its size.
4. both cannot fully avoid cooperation due to their geographical proximity and participation in Nato.

Other developments remain speculation and are difficult to assess.
The latter includes things like future E.U. exits of other member states and potential E.U. instability or even E.U. collapse.

How will the markets respond and what can you do?

Our expectations are that:
1. no immediate rate hike will occur by the US Fed, during a risk-off environment caused by Brexit
2. the Gold price may potentially increase as it’s a defensive asset, along with purchasing Bitcoin
3. a risk-on or neutral sentiment may prevail if the U.K. decides to remain in the European Union.

Top trading tips for this week

1. Markets could be very volatile, so reduce your position size or avoid trading altogether.
2. Invest in risk-off currencies such as long trades in the JPY and assets such as Gold (if it aligns with your system), using Stop Losses and realistic Target Profits.
3. Consider buying high grade Corporate Bonds or Sovereign Bonds, as these prices increase with more demand.
4. Consider investing in Bitcoin, as it’s known to appreciate during risk-off.

And in case we miss anything in this discussion, please feel free to ask us questions directly via twitter using this hashtag: #AMBrexitFAQ
You can also visit our live webinar about Brexit, for further explanation around the event.
Cheers and safe trading,
Nenad and Chris