The referendum to shape our world for the foreseeable future has come full circle with the British public voting to exit the EU with a 51.8% majority. The impact, as we have predicted,was swift and volatile with markets across the globe in turmoil as the risk event was priced in and continues to be priced in.
In FX,the GBP lost ground across the board with the GBPUSD making lows not seen since 1985 as it tested the 1.3227 mark and the GBPJPY suffered a mammoth 2700 pips drop from todays highs. The EUR was less impacted and suffered a 500 pip drop to print lows of 109.13 and was notably more stable than the GBP, which markets have predicted to be the worse off of the two economies as the EURGBP soared to highs of 0.8300 a whole 700 pip gain from the lows. Elsewhere, the JPY acted as its usal safe haven self and strengthened across the board as investors flew to safety, with the USDJPY dropping just under 800 pips to trade below 99 in the first time since 2013.
In equities, the FTSE suffered large losses, dropping over 8% while the DAX suffered a 10% tanking overnight as businesses brace for the impact of the vote. Other bourses suffered similar fates, all collapsing, as fear grip markets and the wider impact of the vote remains to be seen.
In commodities, crude oil dropped several dollars as the USD strengthened and a slow down in the global economy begins to be priced in. Gold enjoyed fresh bids to trade over 100 dollars higher than the pre vote price, topping out at 1358.
The market volatility is all but over and we expect the day and foreseeable future to be impacted by any and all news regarding the BREXIT and how authorities will manage the event and any fallout from theevent. Most likely we will see a continued dip in risk with safe havens flourishing while the GBP and EUR currencies and equities tank.
The next event markets are watching for are Prime Minister Cameron`s speech, in which he is rumored to be stepping down as the Prime Minister. Also, worth noting is that the Bank of Japan will be itching to keep its Yen weaker after the key 100 level was broken, and as they have said, will keep an eye on liquidity and act accordingly to protect their interests. In the later stages of the day we may also see other shocks as any disgruntled EU members, notably Italy, look to leverage the event to their advantage by seeking to better the terms of their membership or threatening outright exit referendums as we see far left parties resurface.