Shopping Product Reviews

A currency crisis called Brexit

Black friday

Call it Black Friday or whatever you like, the events that unfolded on June 24, 2016 would remain an enigma in the minds of the millions who voted and those around the world who watched in awe as history was rewritten 43 years later. Britain was officially signed as part of the euro zone. Almost immediately after the landmark referendum result came to light, markets around the world reacted wildly even as the British pound suffered its biggest drop in a single day. While investors scrambled to find comfort in bonds and gold, the strength of the Japanese yen forced investors to abandon equity markets in the euro zone and beyond.

Pandora’s box

Central banks around the world had been on the receiving end of a full-blown currency war after the Lehman saga when the Federal Reserve was forced to step in with its only quantitative easing measure that would have far-reaching consequences. reach around the world. financial arena. Even as I write this column, the pound, which is trading at 1.3310, has fallen 17% since it peaked at 1.5930 in 2015. The currency’s slide has triggered shock waves in European markets and Japanese, which has forced investors to accumulate heavenly assets that cause the yen to strengthen below 100 to the dollar.

The pounding of the pound

The responsibility now rests with policy makers and central bankers to respond and contain the after-effects of the consequences of Brexit. Markets around the world crave liquidity even as the UK’s major banks face the heat of the pound’s slide. As global markets reeling under the pressure of the liquidity crisis, erratic movements in indices caught the attention of central bankers, so much so that Mark Carney of the Bank of England took precautionary measures to announce the availability of 250 billion euros. pounds to banks across the UK. Such unforeseen levels of currency crisis would result in possible interventions by the likes of the BOJ and the PBOC in the coming days.

What awaits us

While high volatility has been a cause of ruin for short-term traders, it would certainly act in favor of those who loathe rate cuts in the coming months. The Federal Reserve has clearly stated its position on global uncertainties and has promised to cooperate with central banks around the world avoiding further rate hikes in 2016 and possibly 2017. There is scope for the ECB to arrange for further easing to appease nervous nerves in the face of the ongoing crisis.

Leave a Reply

Your email address will not be published. Required fields are marked *