At the end of the day 51.9% voted to LEAVE while only 48.1% voted to
REMAIN in the EU. England showed the most support for a Brexit with a
53.2% – 46.8% vote, followed by Wales which reflected a 51.7% – 48.3%
vote. Meanwhile Scotland and Northern Ireland both showed support for
the Remain camp with their votes coming up at 38% – 62% and 44.3% –
Not surprisingly, the uncertainty surrounding an imminent Brexit
caused volatility and chart spikes across the financial markets. Who
wouldn’t with all the gloom and doom talks from government officials, analysts, major businesses and even Lindsay Lohan?
GBP/USD hit new 2016 highs at the start of the Asian session before it
saw a U-turn all the way to the 1.3400 mark (-10%). That’s the pound’s
worst trading day on record and is its lowest level against the
Greenback since 1985, people! Britain’s currency also saw similar losses
against the yen (-14%), the euro (-8%), and most of its major
Even the stock markets didn’t escape from the overall risk aversion.
Nikkei closed with a 7.92% loss after briefly triggering its circuit
breaker. Meanwhile, Australia’s ASX fell by 3.17%, Hang Seng fell by
2.92%, and the Shanghai index capped the day 1.36% lower.
3. The powers that be are already making their moves
Unlike the SNB’s bombshell last year,
the EU referendum was a catalyst that government officials and central
bankers have been preparing for. So far several authorities have already
reacted to today’s events:
David Cameron stepped down as Prime Minister – A few hours after the final tally PM Cameron held a presser announcing that he would be stepping down from his position
and will hand over the reins to a new PM by the time of the
Conservative Conference in October. Apparently, it will be up to the new
PM to negotiate the exit terms of Britain. Can anyone say hot potato?
Japan started jawboning before it was cool – Just as
volatility was starting to get interesting, Japan’s Finance Minister
Taro Aso hit the newswires, warning that they’re worried about the
Brexit’s impact on the global economies and financial markets. He added
that they will “respond firmly when necessary.” Duhn duhn duhn.
BOE’s Mark Carney gave his own PSA – In a presser
that’s worthy of a House of Cards episode, Bank of England Governor Mark
Carney tried to calm the markets by saying that he and his gang have
“taken all the necessary steps to prepare for today’s events.” If you
recall, Carney had campaigned against a Brexit, saying that it would
lead to low employment, weak pound, and possibly even a technical
Today Carney reassured said that while there would be a period of
uncertainty and adjustment, the U.K.’s banks are better equipped than
they were back in the 2008 financial crisis. He also said that the BOE
is willing to provide 250B GBP in additional funds should the banks need
it. Last but not the least, he said that the central bank will assess
economic conditions and “consider any additional policy responses.”
The SNB intervened in the currency markets – In an e-mail the Swiss National Bank (SNB) confirmed that it had intervened in the currency markets following the immediate rise of safe-havens like the Swiss franc. The SNB said that it “intervened in the foreign exchange market to stabilize the situation and will remain active in that market.” These guys know how to walk the talk!
The G7 officials will have a huddle – Word around
the hood is that Deputy Finance Ministers of the G7 nations are
scheduled to conduct a phone conference at 11:30 am GMT. Three guesses
on what they’ll talk about.
4. The drama ain’t over yet
What now, you ask? The Brexit saga ain’t over, folks! According to
Article 50 of the Lisbon Treaty (that bit that gives EU members the
right to withdraw), Britain has two years to negotiate its withdrawal
from the EU.
Until then, the U.K. (and the markets) will likely have speculation
sprees on the process and effects of an actual exit. Some of the popular
topics include second referenda for both the Brexit and the Scottish independence, a technical recession for the U.K., and the other EU members launching their own withdrawal processes.
Stay tuned for detailed and additional updates on this historic event!