Those who favor a British withdrawal from the European Union, commonly referred to as a Brexit which is a portmanteau of the words British and exit, are concerned that being a member undermines national parliamentary sovereignty, while some in favor of membership argue that in a world with many levels of supranational organization any theoretical loss of sovereignty is more than compensated by the benefits of membership of the European Union.
Many prominent figures have spoken out on the matter, including government officials, industry representatives and policy experts. Some back the Brexit, asserting that the United Kingdom could derive many benefits from striking out on its own. More specifically, they contend that breaking free would allow the nation to broker its own trade agreements, devise a new strategy for handling immigration and craft new regulations affecting key areas.
Others have a different view, arguing that leaving the European Union could seriously undermine the British economy. One major concern is the uncertainty that will exist should the Brexit take place. Another point of contention is the belief, held by many, that the United Kingdom is perfectly capable of negotiating better trading terms with other members of the European Union.
Not to discourage you from taking any trades during this event, but I think it’s worth noting that forex brokers themselves are upping their risk management game to avoid exposing their balance sheets and clients’ accounts to potential losses from any fast and furious market moves. As it turns out, these industry players are still haunted by the ghosts of the 2015 SNB shocker, which triggered margin calls, wiped out several accounts, and even forced some firms into closing shop.
If a Brexit is likely to cause a sharp sell off for the pound, then a vote to stay would spark a pound rally, right? Well, the currency’s reaction might not be as clear-cut because the U.K. would be left with a considerable amount of political uncertainty either way. As it is, the Brexit issue has caused rifts within political parties that might persist even after the referendum. Apart from that, profit-taking could be just as swift as the initial reaction to the poll results so sharp price reversals could be in the cards. Market participants are likely to price in their expectations for the vote in the next few days so be mindful of “buy the rumor, sell the news” scenarios as well.