General market theme
On Friday financial markets around the world were stunned when they found out that Britain has voted to leave the EU after more than 40 years of being one of its key pillars. Investors woke up to a new reality where both the UK and the EU are far weaker apart than they were together and the result was a bloodbath in most instruments, a bloodbath that has started in the currency markets overnight as the first results were coming in.
The Euro and the Pound were the main losers at the end of the week with the global stock markets deep in the red as well while the Dollar and the rest of the safer haven instruments enjoyed gains as investors fled to safety. What lies ahead is yet to be known as any previous outlook we had is now history.
Price action highlights
The Euro spent Friday trading between the 1.1000 and the 1.1200 levels trying to find a balance point after the result of the referendum that leaves Europe wounded and without one of its main players. The UK was never part of the Eurozone but is one of its main partners and the trade agreements that are to be torn apart mean that Europe will undoubtedly take a blow as well. In the short term we have no outlook at all as the Euro is now treading in uncharted territory but the medium and longer term outlook of the Single currency is now under serious doubts.
The Cable settled somewhere above the 1.3500 level on Friday after attempting to recover some of its losses which proved fruitless as investors were dumping the UK currency on the back of the referendum vote. The UK currency dropped more than 1,500 pips in a matter of hours when the results showed that the UK no longer wishes to be part of Europe and now any outlook we had for the Pound is in the past and we need to see how the domestic economy will handle this new reality. In the short term we advise patience as we need to see some normalized price action before assuming that all the dust has settled.
Focus of the day
The economic calendar has a couple of important US-related reports pending for release today and we’re keen on seeing how the major money markets will trade today after the referendum decision that shocked the financial world. The Advance Goods Trade Balance along the US Services PMI levels are worthy to note down in order to assess the progress of the US domestic economy, however the focus will remain in Europe and any fresh post-Brexit developments.
Economic Calendar
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