On Friday, the GBP/USD reached the lowest point over the previous 31 years and may yet continue falling.
It sucks to be the British Pound today. However, no one thought that the referendum of conservative Brits would defy all expectations. 51.9% of the population voted for exiting the European Union. At some moment of time, the Pound lost 10% against the US Dollar, the market was covered by the wave of “escape from risks”, and investors preferred to wait in “safe havens”. The current quote for the pair is 1.3649; today’s low was at 1.3228.
So, the main intrigue of the month is now over – the popular will assumes that the United Kingdom should exit the EU. However, this will has absolutely no force from a legal perspective. There might be a scenario when the country’s government disregards the referendum results, but this scenario is very unlikely. The European Union has never dealt with anything like this, that’s why we can assume that the exiting procedure is going to be difficult and take a lot of time.
One shouldn’t overestimate the voting results – the markets were way too nervous today, but it happens quite often. If the Brits decided not to be a small part of a serious alliance any more, then they have ground for doing this.
On Friday, the Bank of England announced that it was ready to provide capital markets with extra funds of 250 billion Pounds and that the country’s economy is strong enough to hold out against difficulties. According to the Governor of the Bank of England, Mark Carney, the British economic system will be able to adjust to new procedures without t the EU, and the British Central Bank has a good crisis management plan.
Generally speaking, the calm and serious Brits shook the market quite well today. It’s a clearly political issue not involving finances, but what happened today is a wonderful and rare example of democratic will, when the government follows the voice of the people and lets them to choose by themselves.
RoboForex Analytical Department
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