Sterling climbed as Asian stocks went cautiously higher as trade on Thursday opened. Investors sought out safe haven investments like Govt. debt and the Yen.
Apart from the EU, most markets around the world wait with bated breath on the Brexit vote. The vote will decide whether or not the UK stays with the European Union or exits it. The UK is one of the most powerful and influential of countries in the EU, the world’s largest single market system. In wake of this, Sterling climbed steadily, reaching a six month high against the US dollar. It is noteworthy that it is a 6% hike in just one week. The main reason for this is that investors squared a number of short positions ahead of the Brexit vote.
European stocks are expected to be flat or with a slight hike opening today.
Will they or won’t they?
At the time of writing this article, the ‘Remain’ camp have a marginal lead on the vote. Both camps are still close as referendums tend to be, with no clear lead, making markets around the world roll slow and with extreme caution. Asian markets are especially feeling the strain with trade being thin and erratic. The MSCI an index of Asia Pacific shares outside of Japan rose by a measly 0.2%. Most markets in Asia were either flat or tending toward the negative with China’s SSEC marking the biggest loss. Japanese Nikkei was the only gainer with a respectable 1%.
The expectation is that Brexit will choose to stay in the EU, so markets are expected to rise soon after and during the vote. While that is what is expected the vote might as well swing the other way, so it is better to be cautious, in fact, that is why markets are at an almost stagnant level right now. Market volatility indexes are at a high point right now. VHSI, a market volatility index for Hong Kong was up, reaching 25, even during December last year, it was only at 18. Another index the VIX was at its highest point recorded.
Some investors expected the GBP to drop value, almost by 15% ahead of the vote. In fact, if the British people do decide on leaving, most analysts do think it will be the case and that the GPB will drop drastically.