Brexit could be very real

Market so far remain fixated to troubles in the Euro zone and focusing on potential Grexit and overlooked the high possibilities of an exit of Britain from European Union.

• David Cameron has conveyed that he will put the membership of UK in European Union on a referendum vote to be scheduled in 2017.

• Recently it was suggested that the vote could be brought forward, should the current conservative party win the election.

• Britain differs with the European Union's target for a financial transaction tax, single market & various regulatory positions.

• UK faces election this year, so far set for May 7, 2015.

• Major contenders are the current government or the conservative party led by Mr. David Cameron and labour party led by Mr. Ed Milliband.

• Recent poll shows that conservative part showing only slight majority.

Analogy -

• Both the election & the referendum are expected be very volatile event for the market. This was so far grossly ignored until recently.

• In recent future, the cost of insurance against three months volatility in pound soared to 10.4 percent against the dollar, highest in three years as observed in the option market.

• Cost of insurance against soared to 11.57 percent, highest since 2011.

Pound is expected to face headwinds as the day close by.