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    UK: Immediate market impact of a leave vote - HSBC Sandeep Kanihama

    Research Team at HSBC, suggests that a UK vote to leave EU would likely have a large and immediate impact on sterling.Key Quotes“Our currency strategists think a vote to leave could send GBP-USD down to the 1.20-1.25 range, a 13-16% fall from current levels. Initially at least, this would likely be accompanied by a significant fall vs the euro too.While sterling may bear the brunt of market reaction, the impact would likely be felt across asset classes and regions. A vote for Brexit could trigger a global 'risk off' move. If market conditions became severely dislocated, central banks might come under pressure to intervene.BoE ready to flood the market with liquidityIn the UK, the BoE's initial aim in stressed market conditions is to minimise the cost of any disruption to UK financial markets. The primary line of defence is liquidity provision. A widespread shortage of liquidity can be met by the BoE activating its Contingent Term Repo Facility, to provide central bank funds against a wide range of collateral. Any individual institution that is short of funds can exchange illiquid assets for central bank money through the BoE's Discount Window.But to reduce the likelihood of needing to use 'emergency' facilities, the BoE has already announced additional long-term repo operations that span the vote. If there is a shortage of USD in London, the BoE can also supply them via its agreement with the US Fed. Indeed, the BoE has conducted (at least) weekly USD repo operations since 2008, although it has not received any bids since late 2009.”

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