“If we vote for leave, it will be a pretty precipitous decline of sterling,” Allianz Global Investors Global Chief Investment Officer Andreas Utermann told Bloomberg. “The negative implications of an out vote could be very serious.”
Related: Brexit Sends Sterling ETF to All-Time Low
The government and the Bank of England have both said that a Brexit would hurt the economy. Moody’s also warned that it could downgrade U.K.’s credit rating if the country leaves the union. By leaving the union, the UK would need to negotiate a new trade agreement with the EU that would preserve some of the trade benefits of EU membership. Consequently, without the union, UK exporters would be pressured. The depressed GDP growth and more difficult export conditions would impact sectors like financial services, exporters, retail and property, which would also have an adverse effect on British equities.
The optimism for a remain vote also helped bolster related country-specific ETFs, with the iShares MSCI United Kingdom ETF’s (NYSEArca: EWU) up 0.7% Wednesday.
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CurrencyShares British Pound Sterling Trust