‘Brexit’ – Could Pound Volatility Get Worse?

The video discusses the financial implications of Brexit, focusing on the volatility of sterling and its impact on markets. It highlights the market's pricing of Brexit risk, the potential for further sterling weakness, and the strategies investors are using to hedge against currency risk. The discussion also covers the implications for UK equities, inflation, and the broader economic outlook, emphasizing the importance of understanding market dynamics and investor behavior in the context of Brexit.

What is the main financial vehicle by which markets are pricing in the Brexit risk?

• The Euro

• The Japanese Yen

• The US Dollar

• Sterling

What does the 'Big Mac index' analogy suggest about the fair value of the pound?

• It is overvalued at 1:50

• It is at fair value around 1:50

• It is undervalued at 1:20

• It is at fair value around 1:37

How have global investors adjusted their allocation to UK equities in response to Brexit?

• Decreased to net 20%

• Increased to net 30%

• Decreased to net 10%

• Increased to net 25%

What strategy are investors using to manage currency risk in the context of Brexit?

• Investing in emerging markets

• Hedging the currency risk

• Buying more US dollars

• Selling all UK equities

What could be a potential consequence of a significant sterling move on UK inflation?

• Deflation

• Higher inflation rates

• No change in inflation

• Lower inflation rates