Several weeks ago markets were hit by the surprising win of Donald Trump. Can the Italy referendum outcome have a significant effect on the markets as well? JFD Brokers provides their outlook on the event.
2 December, AtoZForex – The Italian referendum is scheduled to take place this weekend. There is a political uncertainty around the event due to the promise of Matteo Renzi to step down in case of a “No” vote. As it increases the risk for the Eurozone to divide and the European Union to come to an end. Hence, there can be a string of volatility before and after the referendum.
To be aware of potential risks, AtoZForex’s readers have requested information regarding the risk-aversion steps of retail Forex brokers. Therefore, we have reached out to JFD Brokers to attain broker’s expectations for the event. Explore below the comments of Victor Tomov, Head of Communication and Information at JFD Brokers. Along with the possible market outlook post the referendum results.
JFD Brokers risk-averse actions
We have in place a sound communication procedure ensuring that all our clients are informed in advance of any potential high market volatility conditions and the risks involved. The Italian Constitutional referendum is not an exception. Although there is a possibility for the spreads to be much wider than normal, we are confident in the stability of our price feeds. Therefore, our standard trading terms and conditions (including the margin requirements) will remain unchanged with regards to the referendum.
It is important to mention that we run a strictly regulated 100% DMA/STP Agency only business model granting our clients direct, anonymous and MiFID compliant post-trade transparent access to all major liquidity sources.
Italy referendum result: Impact on EUR cross pairs
Ahead of the NFP report is difficult to forecast exact levels for the euro cross pairs. A “yes” vote will favor the euro bulls. As the single currency will get rid of a downward risk and the political changes will be restricted within Italy’s borders. On the other side, a “no” vote raises the risk for the Eurozone to split and the European Union project to end. Hence, the negative vote adds further pressure on the euro, and will potentially push it significantly lower with the opening of the markets on Monday. It’s remarkable that euro cross pairs didn’t have a significant impact from the Italian referendum yet.
It’s worth to mention that a “no” vote does not mean the end of the Euro Area. The downward pressure on the euro comes from the prospect that current Prime Minister Matteo Renzi, who proposed the referendum, will resign if Italy votes “no” and that the opposite Italian party Five Star Movement will take the lead and pursue euro exit as the Five Star Movement party has been actively campaigning for a referendum for Italy to exit the euro.
ECB meeting: economy review if a “no” vote
We wouldn’t expect ECB meeting to make any changes on December 8th, especially if the referendum end with “yes”. However, a “no” vote will alert ECB to re-examine if the economy is viable to suffer one more crisis. ECB will try to take any measures needed to ensure financial stability, but not in the policy meeting four days later. They would expect the market to settle down first, and study their options before acting, as they use to do.
JFD Brokers recommendation for Traders
We urge traders to take all necessary precautions closely monitoring their accounts. Ensuring that they have sufficient funds to sustain any open positions.
Referring to the communication lines, JFD Brokers have dedicated Help Centre numbers for clients from different countries. The multilingual Customer Support team is available to handle client enquiries 24/5. Moreover, the broker provides clients upon request with Post-Trade Execution reports. Presenting times for order matching and verification, names of the Liquidity Providers that filled the FX trades and other details, explaining the entire execution process.
Do you have questions related to the JFD Brokers’ view on the Italy referendum result?? Let us know in the comments section below.