Soothing words for markets from Osborne? That helped for a very short time and resumes its falls and is basically on its own. While there is a general “risk off” atmosphere which also weighs on the euro and commodity currencies, the fall in the value of GBP is at a higher order of magnitude.
GBP/USD reached new multi-decade lows, EUR/GBP is making its way up and GBP/JPY continues the downfall.
The Brexit aftermath and the high level of uncertainty are just too much. We noted 9 reasons for the extended fallout. Basically, things just look worse over the weekend, with confusion all around.
And here are a few more recent developments:
- Germany toughens up: So far, it seemed that EU officials, France and most European countries wanted a formal trigger of Article 50 in order to begin the exit process and end uncertainty. Britain was in no rush and Germany led by Merkel, did not seem to rush things either. Leaders of the Leave camp talked about having “informal” talks ahead of the triggering. But now, Germany rules it out: either official talks on an official exit announcement or nothing at all. This adds to uncertainty.
- Some shares trading suspended: A sign of the extraordinary times can be seen in London’s stock exchange: Shares of Barclays, RBS, Taylor Wimpey, Berkeley Group, Legal & General and perhaps others were suspended.
- Rate cuts from the BOE: There is growing speculation that the Bank of England will be forced to cut rates and even add QE in order to provide a cushion for free-falling financial markets. This may stabilize stocks but is not pound-positive.
Where is the next line of support? Basically we are at uncharted territory and at levels last seen in the 80s. In addition, volatility is quite extreme. 1.30 is a clear line of support, due its roundness.
So far, the low is 1.3192, below Friday’s trough of 1.3230. The end is not near.