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The Brexit effect

Posted by Fullerton Markets on June 27, 2016 at 2:00 PM


On Thursday 24th June 2016, Britain voted ‘Leave’, opting to quit the European Union. 

The final result is in favor of Brexit, with 51.9 per cent voting to leave the European Union and 48.1 per cent voting to stay. The markets saw a frantic day of trading resulting in bank stock crashes across the kingdom and the sterling plummeted 11% against the dollar to a 31-year low. The Brexit effect took the world by storm as stocks plunged worldwide. The Dow Jones industrial average tumbled 610.32 points and The S&P500 dropped 75.91 points. Both indexes took their biggest losses since August 2011.

Meanwhile, the massive dose of uncertainty saw investors flocking to safe-haven assets such as gold and the Yen. Gold skyrocketed past US$1,300 level while The Dollar/Yen spiked from a Thursday high near 107 to a two-year low near 99.

Moody’s, the credit rating agency, has also just lowered the outlook on Britain’s credit rating to negative from stable. It says that Britain’s economic growth will be weaker, following the EU referendum. It also warns that the public finances will be weaker than previously forecast, meaning it will be harder to cut the deficit.

Moody’s says that the Brexit vote will herald a “prolonged period of uncertainty” for the UK, with negative implications for growth in the medium terms and warns that the effectiveness of economic policymaking could be ‘somewhat diminished’ by the decision.

Time to trade Gold?

 

Our Picks

XAUUSD – Strong uptrend. Potential buying near immediate Support around 1311.00

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EURJPY – Bearish. Potential short selling near resistance and channel around 115.55

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XAGUSD – Potential Long around immediate support at 17.50

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Top News This Week

EU: ECB Draghi’s Speech Tuesday 28th June, 9.30pm.

US: FED Janet Yellen Speech Tuesday 28th June, 9.30pm.

UK: Manufacturing PMI Friday 1st July, 4.30pm.

We expect figures to come in at 51.0 (previous figure was 51.3).

 

 

Fullerton Markets Research Team

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