Worries over an exit of Britain from the European Union have taken their toll on Sterling. As June 23rd approaches, the day in which Britons will vote to either stay or leave, so does the pressure on the Pound Sterling mount. Media polls are failing to indicate a clear result, and the FX market is getting nervous. And yet, a Brexit seems unlikely and when markets price in the unlikely—even partially—it’s worth taking the other side.
Why A Brexit Still Seems Remote
The risk of a Brexit is mostly economic. Warnings of the financial calamity that could hit the UK have been coming from notable economists from the UK Treasury but the most noteworthy and important warning came from the Bank of England.
The Bank of England Governor, Mark Carney, delivered a stark warning in his latest conference. Carney laid out a rather bleak scenario in case Britons choose to exit the union. The BoE Governor stressed that growth would falter, unemployment would jump and inflation could spin out of control. [Read more...]