This past week was filled with jarring news throughout the United Kingdom as the High Parliament through the looming Brexit into a cloud of uncertainty. The recent ruling opened up the possibility that the departure from the European Union may not proceed as planned. When there is uncertainty in financial markets, often times investors begin to panic which can lead towards large fluctuations in daily trading volumes and abnormally large swings in bond yields.
The average investor can be influenced by the emotional roller coaster of losing money on their investments or seeing large swings in their retirement accounts. Highly skilled traders are likely to be making investments on different aspects of the news. Some investors may look at derivatives, the CMC markets, government bonds and other foreign exchanges as a way to become more diversified during the uncertain market conditions. The potential for a major selloff of the LSE is not likely, but there remains a fair amount of uncertainty with the day to day trading.
The uncertainty that this week’s ruling has had with the finance markets, has also carried through to the value of the Pound. The Pound has dipped almost 35% in 2016 compared to the Euro and closed at a value of $1.12 for each Euro, the lowest point recorded over the last five years. Consumers are already beginning to feel the strain caused by the decision in June, with many popular consumer electronics experiencing a 25% price increase over the past five months. The short term strain on the economy, could lead to some political fall out at next years elections.
Over the coming weeks, it is likely that the government will petition against the High Court to appeal the most recent ruling. The news this week does not guarantee that the Brexit will not occur, it simply now will require that Parliament approves the upcoming exit. The potential for a reversal out of the Brexit remains unlikely according to the most recent observations as reviewed on the BBC. The short term impact is likely to mean more ups and downs of the equity and bond markets in addition to the greater potential of companies pulling out of the U.K. for their corporate locations. Banks will remain in flux until their is a clearer path towards passporting, and the full understanding of how two independent markets will manage to work together once the separation has begun.