All of the talk about the European Union in recent months has increasingly been dominated by the upcoming referendum on Britain’s  popular vote to either exit the European Union or forge deeper permanent multilateral ties with it. Until now the likelihood of the outcome of the referendum has lacked the clarity provided by markets through futures or currency pairs trading. That changes this Wednesday, March 23rd. The “Brexit” vote is held exactly three months from that day on June 23rd. This Wednesday the benchmark gauge of volatility on the Sterling/dollar trade will cover the time frame including the vote.

Markets have thus far had to rely on surveys to measure the odds of the outcome of the vote. Surveys, particularly this far away from the vote, are highly unpredictable. Some would argue they are a blunt instrument, at best, in gauging sentiment. Just ask Hillary Clinton in regards to the Michigan Democratic primary. However, based on the little we know, it does appear as though there is a high degree of probability that if Britain does vote to leave the European Union, there will be a meaningful spike in volatility.

For a preview of the type of volatility that emerges with themes of this nature, just think back to September of 2014. After years of negotiating, coercing and finagling, the vote held in Scotland to remain as member of the United Kingdom was watched worldwide as a potential precursor to what is on tap in three months time. The dominance of the Scottish vote narrative in European markets was undeniable. Volatility spiked at the mere mention of separation. European bourses traded off sharply and global markets were held hostage by the drama for the weeks leading up to the vote. Ultimately, as a result of the vote to remain a member of the United Kingdom, the head of Scotland resigned.

The British vote on Britain’s membership in the EU is not only of significantly greater consequence - it also has the potential of driving more volatility into global equity markets. This Wednesday we will get our first glimpse as to the lay of the land in Britain. Look for volatility to once again rear its head and expect a posturing of global elites to take center stage over the coming months.

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