Pound Sterling (GBP)
The UK’s vote to Brexit came as a massive shock to traders who had been overwhelmingly confident that the EU referendum would result in a ‘Remain’ victory. Sterling crashed to over a 30-year low against the US Dollar and UK stock prices dived. A period of uncertainty is expected to weigh heavily on Sterling, and that period may have been extended after Prime Minister David Cameron announced his resignation. It is worth noting that Sterling has rebounded markedly from intraday lows, and concerns of overreaction may cause the Pound to recover some of its losses.
With the exception of the weak Pound, the Euro struggled versus its peers amid mounting uncertainty regarding the impact of the UK’s Brexit vote on both the EU and the Eurozone. With traders flocking to safe-haven assets, the Euro is coming under even further pressure from the US Dollar uptrend. In addition, bond prices have risen, reducing yields and potentially limiting the impact of the European Central Bank’s (ECB) asset purchase programme. Should safe-haven demand persist for a sustained period, the Euro may depreciate further.
US Dollar (USD)
Against the Pound the US Dollar surged to its highest level since 1985 following the result of the UK’s EU referendum vote. Given that market uncertainty is unlikely to abate swiftly, the US Dollar could see huge gains. This will not be welcomed by the Federal Reserve as overvaluation will reduce the likelihood that the next move will be to tighten policy. Whilst domestic data is unlikely to feature highly today with markets in turmoil, US Durable Goods Orders is still considered a heavyweight publication and will be of interest for those wishing to gauge the US economic outlook.
Australian Dollar (AUD)
Much like the Euro, the Australian Dollar is struggling versus all but the Pound thanks to significantly reduced risk-appetite. The ‘Aussie’ (AUD), like most commodity-correlated assets, is likely to see sustained devaluation in the long-term. This will be considered positive by the Reserve Bank of Australia (RBA) which has expressed concerns regarding overvaluation for a long time.
New Zealand Dollar (NZD)
The New Zealand Dollar is trending within a narrow range against its Oceanic neighbour as risk-off trade weighs on demand. The NZD GBP exchange rate is holding healthy gains, but risk-appetite is likely to remain damp for a considerable period to come.
Canadian Dollar (CAD)
Although oil prices have declined significantly, the Canadian Dollar has not been as adversely impacted by Brexit as some of its commodity-correlated counterparts. This is perhaps due to anticipation that the Federal Reserve will have to delay hiking rates whilst safe-haven demand keeps the Dollar overvalued.