GBP, EUR and JPY: What impact will a Brexit have on the major pairs? (Morgan Stanley)

Just days before the referendum on the EU, Morgan Stanley reports on the possible impact of a Brexit on the most vulnerable currencies.

"Our Brexit probability indicator is at 47%, so we would estimate that the market already made a prediction about this probability.

The impact of a Brexit on the major currencies:

GBP: The most exposed currency in terms of the Brexit (British exit from EU) risk. It would weaken due to uncertainty in terms of the economic growth of the United Kingdom and political risks. All comments by David Cameron and Boris Johnson will be monitored by the markets to determine the short-term GBP path.

EUR: The currency would weaken as markets will question the strength of the European project and possibly see other countries follow the UK and leave the EU. After an initial decline, the EUR/USD could stabilise around 1.05 as the surplus of current accounts and the low appetite for risk make it difficult to find investment opportunities abroad, thereby halting the decline of the EUR.

JPY: Our preferred currency to buy as it will be driven by a low risk appetite, repatriation of capital from the euro area by Japanese investors and hedging in equity portfolios."