Brexit: How Thursday's decision will impact MENA
The United Kingdom will announce on Thursday whether it is going to remain a member of the European Union or depart, as the people vote on the referendum that became known as “Brexit”. “There is no doubt that the UK referendum on June 23 is one of the most important events in the UK – and, for that matter, Europe – in a generation. With the outcome too close to call, volatility across markets and asset classes will remain elevated ahead and, in the case of Leave, afterwards too,” Ole Hansen, head of Commodity Strategy at Saxo Bank, wrote in a statement.
While this may seem like a local or regional problem for the UK and Europe, its implications travel beyond borders and are also felt in the MENA region.
Observers are currently taking a close look at the finance industry, expected to be one of the first and among the most to be impacted by the vote. Markets are already quite volatile with stocks dropping and bonds rising.
“A Brexit vote is likely to cause volatility in the financial markets, as well as other asset markets, such as commodities,” an Abu Dhabi-based equity analyst told AMEinfo.
He noted that such volatility may keep the Federal Reserve on hold “for the rest of the summer.”
The United Kingdom is regarded as the financial hub of the European Union, as London has attracted many international banks and financial services’ providers. Analysts forecast a noticeable impact on the finance industry in the UK and the European Union as a whole.
This week, ahead of the announcements, central banks in the US, Japan, Switzerland and the UK have chose to sit this one out and leave policies unchanged, until an announcement is made.
While the decision is yet to be announced, the impact of uncertainty accompanying the Brexit has already been felt in exchange rates of high volume currencies, such as the pound sterling, the euro and the US dollar.
The pound has been undergoing major price swings against other currencies, as forex investors are becoming increasingly reactional with their decisions ahead of the announcement. This volatility was felt in foreign exchange houses in the Middle East too.