According to a recent EM report by Societe Generale, the CEE region will be most affected by the impact of a Brexit vote in the short term, especially those countries within the Eurozone.
The report noted that Poland would be significantly affected by a Brexit, as it is the second largest exporter to the UK after Germany.
These strong economic ties are further supported by the remittances sent to Polish nationals in the UK, according to the report.The report added that although Romania has relatively small trade ties with the UK, it does receive significant remittances from Romanians living in the UK, which would contribute to the volatility the country could experience.
The currencies of the major emerging economies within Europe will be particularly vulnerable to the impact of a Brexit vote.
“The Polish zloty and Hungarian forint will be more vulnerable than other European EM currencies,” said Roxana Hulea, Vice President of EM strategy at Societe Generale.
By contrast, the Czech koruna would likely remain relatively stable due to a lower beta in comparison to the rest of the CEE region. The koruna is currently trading at 24.0356 to the dollar.
Regardless of the outcome of the vote, there will likely be fluctuations in the currencies of the most affected CEE countries.
With the ‘in’ and ‘out’ campaigns sitting neck-and-neck in the polls, Hulea noted that there has been a remarkable resilience in the zloty and the forint.
Although fluctuating, both currencies are currently trading slightly higher than where they were a month ago.
The zloty is currently trading at 3.90320 to the dollar up from 3.93595, whilst the forint is trading at 279.608 to the dollar, up from 283.01.