How Brexit will impact trading
Dear Traders,
Today's shock outcome of a Brexit came as a surprise for many.
The polls showed a narrow lead to the Remain camp, while bookmakers were mis-pricing an 84% chance of a Remain.
While early votes showed an Exit with the Sunderland poll results early in the day, it swung to a Remain lead when votes came from Wales and Scotland.
Interestingly, the majority of voting came from England later in the day and was channelled to the Exit - sending markets into a tailspin.
A few of the major moves were in European Equities, with some dropping to new interim lows up to 16%.
Currencies saw a massive devaluation of the GBP, especially against JPY and USD pairs.
A vote for England not UK
The majority of English and Welsh voters chose Brexit.
53.4% (15,188,406 votes) were for Brexit, while 46.6 percent of them (13,266,996) voted to stay in the EU.
There were 80,000 Welsh votes for the UK to leave the EU - 52.5 % to 47.5%.
44.2% of Northern Ireland voted for the UK staying in the EU, a total 440.437 votes.
Meanwhile Scotland voted in favour of the UK staying in the EU by 62% (1,661,191) to 38% (1,018,322) - backed by all 32 council areas.
What will happen next remains to be seen, as no nation state has ever left the EU.
Brexit could make huge turmoil for countries that want to remain in the EU i.e Northern Ireland and Scotland.
In the near future these two countries might opt out, meaning the UK will cease to exist in its current form.
There is a sense of sadness and loss after yesterday's decision, with one Polish student bound for Oxford telling media she felt "unwanted".
Poles working in the UK send back about £1bn a year to the Polish economy. Will they need visas and/or travel permits now?
Poland now faces the question of how it makes a unilateral deal with the UK.
London voters leaned towards Remain, so there will be a lot of angry people there today.
Oxford voted 70% for Remain - reflecting the UK's young and affluent mindset
Source: BBC
Is the Brexit decision final?
The referendum result is not legally binding yet, as British Parliament still has to pass laws to get Britain out of the EU.
So for now, the UK will remain a member of the EU.
France has already made it clear that it won't let Britain get away from the EU that easy.
Germany Deutsche Bank's chief executive John Cryan, is very unhappy with the UK decision too.
The 5-Star movement has called for two different currencies in Europe - one for the wealthy northern countries and another for southern nations.
The idea might be good, but Germany will find it hard to accept because it will make their currency too strong for exports.
They prefer having weaker economies in the block.
Article 50
Article 50 is legislation the UK will use when formally notifying the EU of its intention to leave.
If Cameron opts to invoke Article 50, the UK would negotiate technical details for leaving the EU with the European Commision.
And Parliament will still need to approve it.
Once the process starts, there is no backing down.
If the UK opts to join the EU again, it will need to go through the same process as any other country applying for EU membership.
Trading perspective
As you can see in our pre referendum coverage:
...I was wrong about 52% vs. 48% in favour of 'Bremain'…
...but all the other analysis came true.
I was covering the event live via #AMBrexitFAQ and for me it was a very interesting event.
Additionally, I have recorded violent price action during vote count and live results - so you can see how it was to watch and possibly trade the event.
When it was finally clear that The UK will opt for Brexit, we saw our prior predictions come true via:
- a massive drop on Equities and JPY pairs; while
- gold spiked up.
Brexit for the trader
The next weeks will be very volatile and we need to access the situation objectively.
GBP/JPY a.k.a the Dragon dropped around 2700 pips, followed by DAX and Equities. GBP/USD was also down by around 1800 pips.
In the video below, you can see my predictions for the next week.
Whatever happens, we will make sure you are on the safe side of the markets.
Check our website regularly for updates regarding analysis, webinars and announcements.
Cheers and safe trading,
Nenad
