On the 24th June, with 51.9% of voters in favour of "LEAVE", the UK woke up with more than just 21 miles separating them from the continent.
London, one of the most cosmopolitan cities in the world, voted to stay in the European Union (with peaks in some boroughs between 75% and 80%), as did Scotland and Northern Ireland; but this was not enough to stem the victories of the anti-European front in the rural areas of Wales.
Brexit, however, was not the decision of a winning country, but rather that of a country frightened of uncertainty for the future. A country that started to search on Google for answers to "What is the European Union?" and "What does it mean to leave the EU?", which quickly became the most popular questions on the search engine, just 24 hours after the Brexit decision was announced.
The square mile, the financial district of London, began a difficult account of the damages, which is yet to be defined, tens of thousands of jobs could be set to transfer into EU countries in the event that Article 50 is evoked.
The political side is extremely complex with the resignation of Prime Minister David Cameron and UKIP leader, Nigel Farage. The two main parties, the Conservative and the Labour Party, appear split internally and Scotland is calling for another referendum for independence.
As expected the market reaction was explosive, causing a widespread collapse in the stock markets, accompanied by a rally of the gold. While the pound plummeted to its lowest level at 1.32 against the dollar in over 30 years.
Volatility was significant with the euro/pound, as the rate fell from 0.79 to 0.76, in the days leading up to the 23rd of June, and then took off, climbing towards 0.81 and then to 0.83. Oscillation on the pair was slightly smaller, that’s because the Eurozone suffered more from the Brexit than the United States; consequently, the euro recovered less than the US Dollar against the pound.
A few days after the vote, Mark Carney, Governor of the Bank of England, announced new stimulus measures and generated a new wave of sales for the pound as traders went short on the sterling.
The uncertainty of the political and economic future of the United Kingdom and the European Union, led volatility to dominate the markets on the last days of June. Given the current state of the markets, "volatility" could be one of the keywords for the next few months, as the pound and the equity markets are still dancing to the tune of Brexit related news.
Written by Carlo de Casa, Chief Analyst.
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