Julius Baer predicted three waves of volatility due to Brexit

“The results of the referendum in the UK caught investors by surprise. Friday will be a “landslide” because everyone will try to hedge risks. This will be followed by the risk of chain reactions and reactions to political statements,” writes chief strategist and head of the analytical Department of the Julius Baer Christian Gattiker in a research note the Dash after the jump UK into the unknown”, published on Friday, 24 June.

The market reaction to the referendum in which the British people voted for the country’s withdrawal from the European Union, will be undulating, says Gattiker. The first wave, he said, has already begun and it is expressed in the active hedging of risks, in particular in the sphere of currency transactions. She will have at the auction on Friday and might grab some trading days next week.

The second wave, according to Gattiker is tied to a chain reaction and attempt to find answers to the questions will be whether the British exit from the EU end. “Watch it will be on the changes in spreads, bond yields of peripheral European States in the coming days. If they will rise, the market is preparing for the collapse of the European Union”, — the expert explains.

Finally, the third wave will reflect a reaction beyond the initial comments of European politicians and mitigating interventions of Central Banks, and will continue for weeks or even months, notes Gattiker.

A referendum on withdrawal of Britain from the EU ended in victory for the eurosceptics: Brexit voted 51.9% of voters. Prime Minister David Cameron on the voting results announced his decision to resign. The victory of the supporters of Brexit triggered a collapse in world markets.

The decision of the British was a big surprise to investors that “in the past few days too accustomed to the idea that the idea of a Brexit will be rejected,” writes Gattiker. While for most currencies, a wave of shock subsides in the next few days, we expect that the weakening of the pound will continue, as it will become fundamental factors, such as the expected reduction in foreign direct investment, he adds.