Decision of the British people to leave the EU last Friday came as a shock to the world's financial markets, causing the decline in stocks and in the British pound. StoxxEurope600 fell by 7%, which was the smost significant decline since 2008. Japan's Nikkei Stock Average fell by 7.9%. The British index FTSE 250 fell by 7.2%. At the closing last Friday the Pound reached the lowest level for more than 30 years.
At the same time, demand for safe-haven assets, such as gold and the Yen, has increased, as well as the trading volume for these assets. In order to avoid destabilization and sharp rise in Franc, Swiss National Bank carried out intervention to the currency last Friday.
Although British Finance Minister, Mr. George Osborne tried to reassure financial markets saying that the British economy remains steady, markets continue assess this event as a negative factor. Osborne said the British economy is strong and its banks and financial system are steady. Nevertheless, the pair GBP/USD continues to remain at lows of the past 30 years.
Since the opening of the trading session today, the market is in correction and the pair GBP/USD is under pressure.
However, probably, exit procedure will continue for more than one year. Within this time market will adjust to new conditions. Sooner or later the pair GBP/USD will experience correction and the Pound will start to rise.
This week, we will recommend to open only short positions on the pair GBP/USD.
Today’s news will include a speech by the head of ECB, Mr. Mario Draghi at 19:30 (GMT+2). He will give his opinion about the UK referendum and future plans of ECB.