What happens Brext

24 June, 2016

Grace Rae

The most important referendum in modern British history is over. The results are out and the United Kingdom has voted to leave and remove our membership from the European Union despite the most recent opinion polls of yesterday suggesting a remain vote.

Remain – 48.1%
Leave – 51.9%

Over the past couple of months the markets movements were wholly based on sentiment since the announcement of a referendum. This past month especially has been increasingly volatile, leaving many Euro buyers and sellers confused as to how to time their trades. The beginning of the month showed a firm lead for a brexit causing the pound to weaken and this trend continued throughout the month up until this last week where the remain vote gain some momentum on the opinion polls.

As we all cast our votes yesterday the currency market was extremely lively across the three majors as exchange rates bounced around. The pound surprised the market with a quick turnaround of strength and rose to the strongest levels seen this month against the euro and the year against the Dollar. GBP-EUR traded between a cent range and GBP-USD between a 2 cent range.

Overnight & This Morning:
As the votes were counted overnight these gains were in indeed short lived. GBP-EUR rates fell 11cents and GBP-USD fell by nearly 20 cents. David Cameron addressed the nation this morning and announced that he will indeed be resigning his position as Prime Minister in October. The markets are still adjusting to the news and with the added political uncertainty there is no indications as it stands as to what will happen in terms of the strength of the Pound. Bank of England governor Mark Carney also spoke this morning making points that in the coming weeks the Bank of England will assess economic conditions and act appropriately. But his comments failed to improve the rates. It’s safe to say the days ahead will surely be filled with numerous claims that could still sway rates and it is uncertain if we will see a further correction in the rates.

What happens next?
At present there is just no way of knowing, but although rates have fallen, it should be reminded that Sterling-Euro rates were at these levels in April so with all things considered this is not a complete disaster and could have been much worse.

Today on the data front there is very little to report on, with only US Durable Goods Order at 13:10 this afternoon. The referendum no doubt will continue to shadow economic data just now.
For those of you who still have a requirement to secure and were waiting to exchange post referendum, do get in touch with your CI account manager to find out how you can secure you rate today. Call us on 01923 725725 to speak to one of our friendly brokers.