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Jun 16, 2016

Bank of England Warns Brexit Uncertainty is Hurting the Economy - Business Live: The Guardian | Business Markets | Stock Markets.

theguardian.com
 
Katie Allen
 
Nervousness about Brexit has obviously been having an increasing impact on sentiment in global markets. This is perhaps seen most clearly in the strong performance of safe havens such as the Japanese yen and the price of gold, which have been tracking the latest referendum odds closely. However, this may not last much longer – for three main reasons.

First, to some extent the nervousness in the markets simply reflects the fact that no-one yet knows the result of the referendum on the 23rd, which is too close to call...
Second, even if the vote is for Brexit, the UK would probably remain a member of the EU for several years. The result of the referendum would only be advisory. While UK politicians cannot ignore the views of the electorate completely, most favour Remain and could drag the process out or try to find a relationship which replicates EU membership in all but name...
Third, the rhetoric of global policy-makers is likely to change dramatically. Currently those favouring Remain have an incentive to talk up the risks of Brexit in an attempt to influence the electorate. But once the votes have been cast, we would expect them to seek to reassure businesses and investors instead.
Admittedly, a UK vote for Brexit (or even a narrow majority for Remain) might embolden EU-sceptics elsewhere in Europe. Other governments may not be able to resist pressure for their own referendums. Brexit could conceivably be the first step towards the break-up of the EU, or the exit of one or more countries from the euro...
The upshot is that the initial market turmoil created by a Brexit vote may be both smaller and shorter-lived than many fear. Indeed, even sterling may not react in the way that many expect. It is likely that worries about the impact on the UK economy would initially cause the pound to weaken – perhaps to as low as $1.20.

Business Live Click:  https://www.theguardian.com/business/live/2016/jun/16/markets-fall-bank-of-england-interest-rates-business-live