The Brexit Referendum and the International Financial Markets are making its way to the Trading Corner! The British Pound (GBP) is trading in a range of moves and the British Business Insider reports that if a British exit from the European Union happens, some believe the Canadian dollar will rise as well.
If you are not familiar with the European Union, you can learn more about the body by reading the current edition of The Economist.
The current financial market turmoil began shortly after Theresa May said that if the British people vote to leave the European Union, then Britain could break off. This decision has a huge impact on the economy, but is also an opportunity for investors. The Prime Minister, who many believe is on the verge of a political death spiral, did this one sidedly, following through on her election promise. Though she did not say it outright, the decision was the final nail in the coffin for the Conservatives.
Brits are very likely to vote to leave the European Union, though the risks are higher than those of the current status quo. When the currency was rising in late June, some observers questioned whether this was the beginning of the fall. However, markets took the latest announcement to mean that the coming weeks will be dominated by stock market activity, as traders invest in fear, uncertainty and doubt (FUD).
If the British voters do decide to vote to leave the EU, then the Canadian dollar will rise, and you will hear some talk about another “Canadian dollar rally”. Some see this as a major asset to the economic engine room, allowing some to justify a currency trade as a “dividend”.
Of course, the British Bank Stock has historically been very low to start the year. However, investors are excited, and the Bank of England has put out a statement to allay concerns. It’s great news for the British Pound, as this is a positive for those who have been selling into a FUD-induced selloff.
This is a huge milestone for the British Pound, and a major move in the direction of a strong USD (USDJPY) as it has gained some strength against the Euro (EURUSD) and other world currencies. The USDJPY has also gained ground against the Japanese Yen (JPYUSD), further heightening the selloff. Some are concerned that this could put pressure on the Euro to a stronger level than previously expected.
For the Euro, there are questions about whether the EU Referendum will have any positive or negative consequences. The European Central Bank will put out an interest rate announcement, and the fact that the decision is likely to be driven by political issues in the UK could change some things. The market reaction will be much different if they are voting for a Remain than if the vote is to Leave.
The next US Presidential election is going to be fascinating. Since so many of the leadership candidates are debating these issues, it’s important to stay on top of political events.
Although some are worried about the impact of the EU Referendum on the Euro, the US presidential election is very important as well. If Hillary Clinton is elected, she would go on to assume her position as the most powerful woman in the world.
The S&P 500 is continuing to soar, and many feel that the sterling (GBPUSD) will continue to hold. Sterling in relation to the rest of the world currency is strong, and with politics, you never know what can happen.
Even though the UK voted to Leave the EuropeanUnion, you should continue to monitor the British economy, and the exchange rates with the rest of the world. Be sure to check back for more to come.