Against the advice of most experts, Britain’s Prime Minister, the President of the United States, multiple think tanks and international institutions as well as European leaders, 52% of Britons decided to quit the EU just over three months ago.
And the decision didn’t go unnoticed in the financial markets. With a quick safety maneuver, the Bank of England helped to steady those markets again. And so did the quick appointment of Theresa May as Britain’s new Prime Minister.
Fortunately, nerves have settled across the country and so have financial markets.
City A.M. collected some charts showing leading indicators of the current state of play, three months after the UK chose to farewell from Europe.
The pound has, that is fair to say, hit a low. To be more accurate, it has hit a 31-year low against the dollar in the first few weeks after the vote.
The currency now seems to have settled at are $1.30 against the dollar and €1.16 against the euro opening the UK up for a range of foreign investment. Whether this exchange rate stabilises remains to be seen once formal negotiations for an actual exit have started.
The first two days post-Brexit were brutal downhill ride for the UK’s leading stock market index. It took creating a new model through some number crunching by analysts to stabilise the index.
The simple fact that more than 75% of the FTSE 100’s earnings come from overseas sources but the index is reported in the local currency sent the bluechip index up.
As the FTSE 100 were on the rise, attention turned to the FTSE 250 as a better representative of the UK economy. Only 50% of earning of the FTSE 250 come from overseas, giving the UK economy a much heavier weight.
It was widely believed the euro would take a hit post-Brexit. And it did. It fell by 5% against the dollar in the wake of the results.
Since then, it started climbing again. Recently, it’s been bouncing around the $1.10 to $1.13 mark. And, more importantly, movement within that range are mainly driven by speculations about central bank actions rather than the Brexit decision.
The flight to gold just before and after the Brexit vote pushed up its prices noticeably. After a slight jump on result day, gold prices (similar to most other indicators) have settled back down again.
Bonds have experienced an increase in demand in the wake of the EU referendum. Demand from the Bank of England, from investors and probably very soon also from the ECB. This has led to one thing – a rise in prices and drop in yield.