Weekly Currency News: Brexit Finally Arrived
26 June 2016 · 3 min read
The pound plunged on last week after Brexit results, suffering its largest one-day selloff in recent history, while the dollar and the yen soared.
Brexit event will affect all the pairs, not just sterling ones, but USD and EUR ones.
After the results, ratings agencies, as Moody’s, warned that it may downgrade the U.K.’s credit rating as it lowered the outlook to “negative” from “stable”.
U.K. prime minister David Cameron announced intentions to step down while top global central bankers convened in Basel to execute an emergency contingency plan. Bank of England governor, Mark Carney, said the Bank has set aside £250 billion of additional liquidity and will act if necessary to help support the British economy.
• EUR/USD: Down to 1.1050
• GBP/USD: stood at 1.3616 late Friday, down 8%
• EUR/GBP: new trend up to 0.8200
• USD/JPY: hit lows of 99.03
The dollar held onto gains against the other major currencies after rallying to a three-month peak fuelled by the U.K. surprise decision to leave the European Union in a historic referendum. This week, Federal Reserve Chair Janet Yellen is due to speak at an ECB central bank conference in Portugal on Wednesday, with investors looking for indications on how Brexit will alter the outlook for the U.S. economy and the path of interest rates.
After an historic week, this week Germany and Spain are to produce initial estimates on consumer inflation on Wednesday, and ECB is to publish the minutes of its latest meeting on Thursday.
Several macroeconomic data of U.K. will be released this week as net lending on Wednesday and current account on Thursday while Bank of England Governor Mark Carney said the BoE would consider in the coming weeks whether to take additional policy responses.
Japan is to release data on retail sales on Wednesday and data on household spending, inflation and manufacturing and service sector activity on Friday. Japanese Prime Minister Shinzo Abe told Finance Minister Taro Aso on Monday to watch currency markets “ever more closely” and take steps if necessary in the wake of the Brexit vote.