Markets usually pay little heed to opposition party leadership elections, but the emergence of hard-left Eurosceptic Jeremy Corbyn as the frontrunner to head Britain’s Labour Party is making investors twitchy.

Corbyn, the favourite to be announced today as the Labour Party’s new national leader, has pledged to renationalise swathes of the economy. But the key concern is that a victory for Corbyn could increase the risk of “Brexit” – a British vote to leave the European Union in a referendum pledgedby the end of 2017 but which may come as soon as next June.

Brexit fears have already pushed the cost of hedging against big swings in the sterling/dollar exchange rate to the highest since May’s national election. Analysts hesitate to blame the rise on the Corbyn factor but say that, if he is unveiled today as Labour leader, the cost could rise further.

Moreover, strategists say victory for Corbyn, who calls for renationalisation of the railways, postal services and energy networks, could pressure the centre-right Conservative government to take a tougher stance on utilities.

“It’s the first time that I can remember that an opposition party leadership campaign has had an impact on the market, and has caused interest globally,” said Morgan Stanley’s European head of FX strategy, Ian Stannard, highlighting Corbyn’s views on the EU as the main focus for investors.

While all three of the other candidates have taken a pro-European stance, Corbyn has demanded socialist reforms before pledging the party’s support for staying in the EU. Meanwhile, however, analysts say markets’ view of Corbyn is tempered by a conviction that he would never be elected prime minister and that prices reflect that.

“The well-held view is if he became the leader of the Labour Party then it wouldn’t be able to win a general election – that’s the way the market is pricing it in,” said Insight Investment fund manager Paul Lambert.