Rude awakening for the EU in this week, After the result of London referendum that sanctioned the victory of Brexit last Friday, European markets have collapsed, taking with him the pound in the first place and then exchange rate related to the euro.
On the day of the referendum many citizens of London, to avoid the risk of seeing the value of their savings depleted of 20%, previously estimated by economists, stood in line at the counters of the ATMs to withdraw their pounds, or to change them in euro and dollars.
These images closely resembled those seen in Moscow after the outbreak of the ruble crisis, or in Greece and in Cyprus when citizens were afraid of the imposed capital controls and forced withdrawals. These were scenes that no one would have imagined in the City of London, soon EX capital of European finance.
On Monday, despite the weekend, the Brexit effect on the markets has been very hard. Investors were not able to escape from the risk-averse attitude and returned to hit the stock market and, about Forex, the euro and the pound.
The latter has slipped even below the values tested last Friday against the dollar, capitulating to a minimum in 31 years, and testing $ 1.3221. The euro was likely at $ 1.10, losing more than 1% against the dollar.
The banks were KO everywhere: British banks RBS and Barclays sold up -15% and the benchmark index of banks in Europe collapsed of -6%.
Investors have bought government bonds considered safer, such as US Treasuries and British bonds.
European stock markets recovered on Tuesday in the wake of the recovery of the Asian markets.
European shares, after scoring intraday record losses, have opened Tuesday’s session rediscovering the expectations about the next intervention by central banks to support the stability of the international markets. Sterling also gained some points against the US dollar, after falling to a minimum of 30 years.
In the morning there was a new public intervention of Mario Draghi to the ECB Forum.
The ECB President has tried to reassure the markets again arguing that the world economy can bring a great benefit from the alignment between the various monetary policies.
Current historic moment, with the YES of the English people to the divorce between the UK and the European Union, Mario Draghi has stressed about how everyone could benefit from a coordinated action between the various world’s central banks.
‘Monetary policy runs the risk of creating inevitably destabilizing effect and the orientation differences between central banks may add further uncertainty about the future.’
To pay the first consequences is always the Forex market as a victim of a very high volatility.
The ECB Forum is an event organized annually by the European Central Bank in Sintra, Portugal. A valuable opportunity to meet with the presidents of other central banks but also professors, economists and journalists to discuss on the monetary policy effects and their implications in the long term.
Janet Yellen, president of the Federal Reserve, and Carney, president of the Bank of England, had to participate and discuss the effects of Brexit in the context of monetary policy, but both have declined: the post-Brexit temperature is still too high to manage.