We’re off and Cameron’s packing his bags
After a confusing and bitter campaigning period the majority of UK voters have elected to leave the European Union. Sterling surged to 1.4940 against the Dollar yesterday as the final IPSOS Mori poll printed a slender lead for the remain camp. GBPUSD peaked at 1.5015 and GBPEUR peaked at 1.3148 as the first counts showed wins for the ‘Remain’ camp.
As news of Sunderland’s ‘Leave’ majority vote came in, Sterling plummeted against all major pairs. Whilst the results were published the Pound reached lows of 1.2021 against the Euro and 1.3229 versus the Dollar, a crash which was faster and further than anything seen since the free-floating system of exchange rates was introduced in the early 1970s. At 7am the win for the “Leave” campaign was confirmed and at 8:30am David Cameron announced that he will resign as the UK Prime Minister in due course.
Mark Carney has stated the Bank of England stands ready to provide more than £250bn of additional funds through its normal facilities and provide substantial liquidity in foreign currency, if necessary.
Whilst the shock reverberates around the world we await First Minister Nicola Sturgeon’s view on Scotland’s reaction to the result and how it affects the United Kingdom. Anti-EU political parties from other European countries are celebrating “Brexit” as their chance to instigate referendums in their respective countries.
The Dollar was at the mercy of the Pound on Thursday as GBPUSD traded lightly and nervously around the 1.4800 level for much of the day with investors unwilling to decide on a direction until the votes were counted.
Data-wise, there was some positive news for the US economy with the Manufacturing PMI beating expectation as well as Initial Jobless claims coming well under the consensus. However, new home sales did fall for May from the previous month. Although, with the UK referendum taking centre stage the data only really serves as a gauge for the overall strength of the economy.
Data to watch: 7am EUR German IFO – Current Assessment & Business Climate & Expectations (Jun). 1.30pm US Durable Goods Orders & ex-transport (May).