In a historical move that shocked global markets, Britain has voted to leave the European Union, with almost 52% of voters opting to Leave. The British Pound hit lows to the US Dollar not seen since 1985, after hitting fresh 2016 highs yesterday. The fall was even larger than during the global financial crisis, when the currency was moving two or three cents in the blink of an eye. Global markets felt the pain as Britain’s vote on European Union membership affected every asset class.
The debate over the U.K.’s EU membership has dominated investor sentiment throughout June, with appetite for riskier assets having built up over the past week as bookmakers’ odds suggested the chance of a so-called Brexit was less than one in four. The victory for the "Leave" campaign will fan speculation that more countries could withdraw from the EU. Central banks are standing ready to intervene as reaction in financial markets proves reminiscent of late 2008, at the height of the global financial crisis.
Moments ago David Cameron announced that he will be stepping down in October, as he believes that a new leader is needed to navigate the UK through the Brexit.
10 year German Government Bonds hit new record lows as financial markets worried about what Brexit will mean for Europe’s stability. As the Pound plunged to record lows, the euro slid by the most since it was introduced in 1999. The euro slumped 3.2 percent, while currencies in Norway, Sweden and Turkey posted even steeper losses. Japan’s currency, seen as a safe haven, jumped by the most against the dollar since 1998.
Across the Atlantic, investors were pricing in even less chance of another US interest hike, given that the Federal Reserve had cited a British exit from the EU as one reason to be cautious on tightening. At this stage, a July hike is definitely off the table.
Commodities have also swung lower as a Brexit is seen by market participants as a major threat to global growth. Crude oil tumbled as much as 6.8 percent in New York, while copper and nickel dropped more than 2.5 percent in London. Safe haven gold was up 5.2 percent.
GBP - 09:45: BoE Govenor Mark Carney will speak to discuss the Brexit
USD - 15:00: Michigan Consumer Sentiment expected to fall to 94 from 94.3