Remain:
· 10% rally in GBP TWI at time of writing (Monday) – the bulk of those gains would likely be vs. JPY and CHF as risk-off trades are unwound.
· GBPUSD would rally, but could face some hurdles above 1.50 particularly if markets bring a July Fed rate hike back onto the radar.
· Limited positive impact for EUR outside of a higher EURCHF and EURDKK where Brexit hedges have been concentrated.
· EURGBP would turn lower, towards our end-2Q target of 0.74.
· USDJPY would likely rebound, but this is unlikely to end the yen’s cyclical strength yet.
· High beta and EM FX would perform well.
· In EM, PLN would benefit the most given its strong ties with the EU. The upper tolerance limit of authorities for EURPLN remains ~4.50 and fundamentals stay supportive.
· Sell Bunds (targeting 25bps).
· Bear-steepening of G3 yield curves should support our steepener trades in Asia.
· Call Spreads on SX5E or SX7P.
· EM equities could bounce by around 6%.
Leave:
· 10% sell off in GBP TWI at time of writing (Monday) – risks skewed to a larger sell-off especially given price action this week.
· GBPUSD and GBPJPY expected to be the major causalities.
· Short EURUSD and EURJPY.
· USDJPY is likely to fall decisively below ¥100 and is technically vulnerable to a move toward ¥95. The MoF’s intervention probability would then increase.
· Expect further pressure on EURDKK, but fully expect the peg to hold as the Danish central bank ramps up its balance sheet.
· In EM, a leave vote would likely hit higher beta currencies, with TRY and ZAR being historically most sensitive on risk-off.
· 10% correction in EM equities. However, expect this to be temporary and provide a buying opportunity, especially for highly cyclical markets like Russia.
· Our latest Fund Manager Survey shows positioning is still overweight in Europe.
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