"Job cuts are inevitable in the forex market ... and there are sharp differences of opinion on whether European monetary union will give birth to a bond market to rival US treasuries, or just kill the volatility that now enlivens European bond trading," Reuters said.
The report, "EMU Explained: Markets and Monetary Union", says that in the short term, London should not be disadvantaged if the UK stays outside EMU.
Andre Villeneuve, a Reuters director, said yesterday: "Even if the UK stays out of a single currency, the City of London will be in. I see no evidence that London will be disadvantaged in the short term." However, Reuters suggests that in the long term, if the UK stays out, Frankfurt in particular will be well placed to play a stronger role.
European equity markets are expected to expand whatever happens to EMU. The report says: "Tens of millions of Europeans are about to be swept up in an investment revolution. Momentum is already building for a transformation of the European savings industry and monetary union could give the process a final decisive push."
The pressure to expand privately funded pension schemes is growing as ageing European populations make current public pension provision increasingly unsustainable. At the same time, EMU will remove currency risk and encourage cross-border investment with new funds.
Foreign exchange dealers, on the other hand, have less to look forward to, according to Reuters - especially those speculating between European currencies. In the run-up to EMU they can indulge in a last blast of glorious speculation, betting on who will join the single currency, and testing the resolve of politicians and central bankers. But after that, the volume of currency trading will fall, putting pressure on jobs.
In the long term, trading in Asian currencies could fill the gap left by the euro, Reuters believes.
Prospects for the bond market remain harder to predict, according to the report. Betting on the convergence of European interest rates in the run-up to monetary union has been a lucrative business.
Without that, the report says, "European analysts acknowledge that Europe's vibrant government bond markets risk losing much of their excitement".
But bond traders could instead start to bet on future entrants to EMU, such as Hungary, or on whether governments are fudging the Maastricht criteria. Financial markets would also be affected by the more fundamental questions about the strength of the euro, prospects for European inflation and the sustainability of the union.
Should EMU unravel, Mr Villeneuve predicts a different financial future for Europe: "Foreign exchange dealers would have to start hiring fast. There would be a lot of volatility in the currency markets."