It seems like everyone is getting ready for a possible British exit from the EU. Recent polls have been showing that the exit camp has a narrow edge. That narrow edge has been consistently showing up in major polls, prompting reactions from across the globe. In the US, for example, the Fed took the polls into consideration in its decision to leave interests unchanged for now. It seems that Brexit might have even been a major factor in the Fed’s decision to retreat from its idea to hike rates more than once during 2016.
The markets have also reacted to the polls in a similar way. So far they have had a week full of sell offs. Major stock indices are down, and oil has also shed most of what it gained over the past 2 weeks. In the meantime, safe haven commodities like gold, have had gains throughout the month of June. Gold recovered from its brief retreat towards the end of May, probably because of a combination of factors and causes, such as Brexit and the Fed’s decision to put off rate hikes as a result.
The only thing left to figure out is whether markets are overreacting to the polls, or whether Britain will indeed go ahead and vote to leave the EU. The British pound has been influenced by the pessimism regarding the possible outcome of the vote that is scheduled to take place on June 23rd, and if Britain choses to leave the EU, Britons will have to get used to a devalued pound. On the other hand, if Brexit does become a reality, there is a chance that markets will halt their slide, since they have already priced in that outcome. Meanwhile, headlines keep on putting Brexit fears up front and center. Britain’s possible exit from the EU has become the most fashionable item in the market’s agenda.