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The Brexit result has caused a financial earthquake

Enrique Velasco, Expert in FX, Sovereign and Equities Risk

 

The result of the referendum held in the United Kingdom on 23 June has caused an unexpected financial earthquake.

Neither the latest surveys, nor the bookkeepers or the market position predicted a result in favour of Brexit. This has meant that the markets have had to recalculate their valuations in just 24 hours.

Initially gazes have been turned on the Central Banks and their new expected monetary stipulation measures to alleviate the macroeconomic effects of the UK's exit from the European Union in the short term. First consequences have been:

  • significant falls on stock exchanges,
  • more negative interest rate curves,
  • reductions in ratings
  • and of course, a significant depreciation of the pound, which has led to the lowest levels in the last 31 years against the dollar.

In addition to all of this, we must add the context of uncertainty generated by the political turbulence that is approaching in the UK. The internal conflicts of the party that must sign article 50, the resignation of the Prime Minister, as well as of the leading defenders of the Brexit project, the possibility of early elections, social tensions and the lack of a specific timetable that clarifies the path to be followed over the next few months, means that markets are declining due to a context of uncertainty which is keeping volatility high the fact that safe assets (gold, Bund, JPY, Treasury) are rising above the rest.

 

 

 

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