A truly historic night! Upon closing of the polls it was looking as if the remain camp would prevail, but shortly thereafter we got the first surprise results which showed that the remain camp was underperforming and the leave camp were doing better than expected. Since then the leave camp has been continuing to outperform which has led to the current result. The UK will leave the EU.
The vote also casts doubt, not only on the integrity of the EU with the UK now leaving, opening up more countries wanting to possibly leave, but also of the UK itself. This is as Scotland and Northern Ireland both voted to remain in the EU and have already said that they want a referendum now on whether to remain part of the UK.
All in all, there is likely to be a rippling effect and we have seen also historical moves in the markets as well.
Currencies
EUR/USD – with a Brexit happening, we see the EUR weaken to drop below the 1.10 level and was close to breaching the 1.09 level, but so far that hasn’t happened.
USD/JPY – has dropped below the 100 level for the first time since November 2013. We are currently trading above this level, but we can expect more volatility.
GBP/USD – has seen the largest drop in history with a drop of nearly 1800 pips since yesterday. We have dropped to a current low of 1.3225, the lowest level since 1985 and there is probably more to go. This is really unprecedented but was to be expected with this result.
Indices
DAX 30 – opened up lower by over 10% due to the Brexit referendum results.
Dollar Index – has moved considerably up due to the Brexit referendum as the GBP and EUR are seeing severe losses.
S&P 500 – has dropped below the 2000 level for a short while where also the next support could be found.
Commodities
Gold – has moved up considerably due to the heightened insecurity in the markets because the UK will be leaving the EU and the consequences of the vote.
Oil – has moved down as with the Brexit the fear of a recession is very much alive, which in turn would cause for a decline in demand for oil.
By Shawn Koopman