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UK Votes to Leave the EU – Havoc Ensues

Published June 24, 2016


  • The United Kingdom has decided to leave the European Union
  •  A majority 51.9% voted to dissolve the UK's 48 year political and economic partnership with the 27 other member countries
  • The historic vote has led to the resignation of PM David Cameron, who seems to have fallen on his own sword after promising to put EU membership to a referendum if his Conservative party won the general election
  • His resignation is the first step in what promises to be a long and arduous process with a whole host of uncertainties
  • The result of the referendum is not yet legally binding, and an Article of the EU Charter must be enacted by the incoming UK PM in order to begin what will be a 2 year process to facilitate the UK's departure
  • As expected, turmoil has reigned across financial markets amid an epic flight to safety – the Pound Sterling at one point had declined as much as 12% against the USD to a 30 year low of 1.3225 before stabilizing at 1.3700
  • USDCAD rose as much as 3.3% off yesterday's lows and is currently trading either side of the 1.3000 handle
  • The heighted risk aversion has crushed equity markets with the Nikkei falling 7%, the FTSE falling as much as 10% and the S&P 500 pointing to a 3.5% drop at the bell
  • Oil has also taken it on the chin with WTI prices down 4.5% this morning to $47.85 a barrel
  • The only instruments finding a bid today are the safe havens: USD, Japanese Yen, gold and US treasury bonds
  • One could argue that the underlying UK and European economy will continue to tick along and that financial markets are overreacting as is their inclination – this certainly will be the case in the following few days so Canadian corporates with near term exposure to the USD, GBP or EUR will want to take a close look at their budgeted/referenced rates and make sure they have a plan in place to deal with any continuing fall out

USDCAD Chart: USDCAD spikes above its key 21 day moving average at 1.2889 (white).