It’s been a truly historic night for the U.K as it appears that the people have voted to leave the E.U. after a number of news channels confirmed that a win for remain is all but impossible. This comes after financial markets were convinced that the result would be a comfortable win for the remain side and betting odds supported it, with implied odds close to 90% for remain on Thursday.
It’s clear that the remain team has run a terrible campaign using the same fear tactics that proved successful in the past and the public has voted and said enough is enough. David Cameron will now have a lot to answer for having offered a referendum in the first place that he clearly didn’t personally back in what appears to have been a politically driven move. It will be very interesting to see how politicians respond to the result in the coming days and weeks but the public has spoken and they have decided they no one want to be a part of a faulty E.U..
Financial markets throughout the night have been chaotic to say the least and this may continue as the day progresses. The pound has fallen more than 10% against the dollar in less than five hours and while momentum appears, at least for now, to be slowing, further downside could follow before the day is out.
All eyes will now be on central banks around the world to see how they respond to these market developments, particularly the Bank of England and the Bank of Japan, both of which have seen substantial movements today. The BoJ was already complaining about the speculative driven strength in the yen and given the moves today, they may now seriously consider some form of intervention.
European markets are now expected to open considerably lower, with FTSE futures pointing 7% lower and this could extend further. It will be interesting to see how traders once the European and U.S. sessions open. Given the size of the moves seen overnight alone, the downside from here could be limited for now, barring any further panic selling.