In a stunning upset last night, British voters decided 51.9% to 48.1% to withdraw from the European Union. The pound sterling was crushed soon after voting results began coming in, falling as much as 11% against the dollar, and nearly 7% against the euro. This morning finds the GBP down 11% against the yen, down 7.5% against the dollar, and 5% lower against the euro.
Gold prices skyrocketed as the "Leave" side began to lead in the vote count, at one point hitting $1,360 an ounce, $104 higher than the Thursday spot close of $1,256. Profit taking has pulled gold prices down to the $1,320 range, "only" $60 higher.
Stocks world-wide have been savaged by the Brexit. One Japanese floor trader was heard pleading "Please stop!" as prices fell more than 8%. The British FTSE 100 stock index opened 8.7% lower, but the total collapse of the pound against major currencies helped limit the loss. The Dow opened down over 500 points this morning
In today's gold market, look for first support at $1,316, then $1,300. Resistance now that panic buying is calming a bit stands at $1,331, then $1,340.
The European Central Bank was supposed to start a new round of quantitative easing today, but nothing is going to counteract the upheavals driving the markets today. British Prime Minister David Cameron announced his resignation this morning, after the Brexit side defeated the Remain side by over 1 million votes. “The British people have made a very clear decision to take a different path, and as such I think the country requires fresh leadership,” Cameron said in this morning's press conference. He will stay in office until October, by which time a new Prime Minister will have been chosen.
Politicians have wasted no time in attempting to use the Brexit to further their own agendas. Spain's acting foreign minister announced that Spain will press for joint governance of Gibraltar with Britain, despite the fact that 90% of Gibraltans voted to remain in the UK the last time the subject was put to a vote. Implicit in the announcement that Madrid wants to see the Spanish flag flying over The Rock is the ability of Spain to scuttle any future trade deals between the UK and the EU. All 27 member nations have to approve new treaties, giving substantial leverage to those who wish to extort Britain.
Leaders of Euroskeptic parties from Sweden to Italy cheered the Brexit results, proclaiming that they would be the next one to lead their nation out of the EU. On the other hand, leaders of several EU nations want to get rid of the UK ASAP, now that they've voted to leave.
Bank stocks are being ground to dust in the aftermath of the Brexit, due both to the anticipated recession and deeper negative interest rates, and the need for the big banks to move operations out of the world finance capital of London to European cities, in order to keep conducting business in the EU without restrictions. The BBC announced this morning that mega bank Morgan Stanley had already set in motion plans to relocate over 2,000 investment banker jobs from London, to Dublin or Frankfurt (home of the European Central Bank.) A Morgan Stanley spokesman has denied the report, without clarification.
Scotland, which had voted overwhelmingly to remain in the EU, has already started steps to leave the UK and remain in the EU. First Minister of Scotland Nicola Sturgeon told reporters that it was “a statement of the obvious” that a second Scottish independence referendum will be called.
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