Previous forecasts predicted that, should the UK vote to leave the European Union, the impact would be ‘moderate’ for banks and financial institutions. However, now, a month after the vote, we can see that this was far from the case, with big banks such as Barclays, HSBC and Lloyds all facing huge problems.
Bank stocks crashed in the immediate fallout of the vote, and house builders, property companies and life insurers also took a hit.
These are always the companies most sensitive to any downturn, but few predicted how largescale the fallout of a Brexit vote would be – largely because so few people predicted it.
In response, it appears plain that interest rates will remain low, something that was recently confirmed by the Governor of the Bank of England, Mark Carney.
Part of this stems from a popular backlash against privatisation, and there appears to be little appetite for rising interest rates across the globe as a direct result.
When the potential risk of a Trump presidency is also factored into the markets, many seem to believe that there’s a number of risks in the market, and people are not investing as a result.
However, for many, Brexit only reaffirms market trends that have been apparent for many for a number of years. Many signs say that the global economy began slowing 18 months ago. Brexit simply reinforces the consequences of such a shift.
Due to Britain being at the epicentre of Brexit and its market impacts, many now predict that British assets will be shunned. Large companies with holdings in UK government debt, or large bases in the UK are now beginning to revaluate their positions. Some are already beginning to suggest that they may offload if short term losses continue in the medium to long term. This has begun to worry many traders and anxiety in the markets could feasibly become a full blown crisis.
If the value of the pound continues to fall, then it seems clear that this uncertainty will cross over to the Eurozone. The UK is the Eurozone’s largest export market, so the link is certain to cause an impact. The scale of this impact remains uncertain, but we may not know for months.
In the meantime, traders need to be cautious. With the value of the pound fluctuating rapidly, real time calculators like this one offered by FXPro are essential for calculating trades and navigating risk. Never go into the markets blind; especially in these testing times.