As the vote of the United Kingdom on whether to leave the European Union this June 23 nears, global financial markets have turned volatile over the last few days. It was not just the European region, which was highly affected by the Brexit, even the Federal Reserve pushed back the projected hike on monetary policy in June.
The referendum, which will be released next week, has weighed on the world economy and has rattled the financial market. Recently, shares in Asia dropped and majority of the stocks in the United States declined.
Some of the bank investors remained anxious as the Brexit could potentially affect their respective operations. In relation to this, the shares of European banks skidded as the Stoxx Europe index performed negatively during the previous sessions. A chief market strategist said that equity-market price action makes one thing clear that the Brexit vote will be a major source of volatility.
However, some equity strategists see the downside of the stocks as a buying opportunity and argued that the precariousness caused by Brexit won’t last. Other experts advised the market players to do hedging since the polls are already near to a margin of error.
Meanwhile, aside from the global financial market, the political union in Europe is also on the table. Prior to this Brexit, the European Union is known to be one of the most successful and solid coalition, right now it is challenged by skepticisms towards the vote.
European Council President Donald Tusk said on one of his interviews that Brexit could be the beginning of the destruction of not only the EU but also of western political civilization in its entirety. The Brexit could open doors for other members of the union to leave as well, thus, a political and economic crisis within the union might happen.
The latest polls revealed that those who want to leave have been increasing as the Europeans are probably questioning the future left for the region. On the other hand, based on the research made by a nonpartisan American think tank, approximately 51 percent of the 10 countries agreed on the European referendum while 70 percent perceived the negative effect that the Brexit could bring.
Technically, the European Union is still the largest market for the exports of the Great Britain and it will be hard for the country to retain the trade connections if it chooses to leave. Similarly, the affiliation of Britain in the union is significantly huge, considering the economic and political influence of the country.
Thus, a Brexit could result into a stricter measures both in and out of the European Union and could wane the involvement of the union in the world trade and commerce. Whether the predictions and analysis regarding the Brexit vote were correct or not, there is something which remains to be true. Brexit will leave a huge impact in the world economy.