Tuesday, 28 June 2016

Tuesday, 28 June 2016

Britain Leaves and markets drop - Global Markets are down but not all is lost

A guest blog by Adam Bobroff, Director at  Foremust Currency Group

GBP/EUR still trading 4% above the 9 year average and is ‘only’ back to where it was at the beginning of last year

The day of the referendum has finally passed and now the UK is set to leave the EU. Since the day of the vote where GBP/EUR and GBP/USD peaked at 1.3135 and 1.5006 respectively, rates have plummeted around 10% to 1.1988 and 1.3195 – a 31 year low for GBP/USD.

GBP/EUR 1 week exchange rate graph


GBP/USD 1 week exchange rate graph



Of course if you have been thinking of purchasing a property overseas, this sort of news probably isn’t what you were hoping for. However, with the resignation of David Cameron, it will have to be his successor that bites the bullet and pulls the UK out of the EU. Will anyone do this? Probably, but if there is any slight inkling that we may end up staying, rates are sure to start rising again.

If all does go to plan for Boris and Co. proceedings of our departure from the EU should start within the next few months. In that period of time, markets will be extremely volatile depending on different events occurring and what influential bodies say. Once Article 50 of the Lisbon treaty is invoked, there will be no turning back for the UK, unless all 27 EU countries agrees we can. Once this happens, it is likely that the £ will continue losing ground unless agreements are made that will allow a free flow of trade with the EU.
Effects Of Brexit

Two separate credit rating agencies have downgraded the UK’s credit rating since the news of the UK voting to leave the EU. S&P have downgraded the economy from AAA to AA.

Prime Minister David Cameron made a speech stating his distress that the public had voted to leave the EU. He stated “The British people have voted to leave the European Union. It was not the result I wanted – nor the outcome that I believed is best for the country I love. But there can be no doubt about the result.”

Get In Touch

For anyone either buying or selling sterling, it is key to get in contact with one of our brokers here at Foremost Currency Group, who will be able to create a tailored strategy for you to either mitigate or take advantage of such circumstances. To get in contact and find out how we might be of help, give me a call on 01442 892 073.   Needless to say today, through-out the next weeks and months there will be talks of moving forward with the British exit from the EU. As previously discussed these talks are highly likely to cause volatility in all sterling crosses.

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