Brexit referendum was one event that caught the attention of the entire world. It was a day when the most unexpected verdict of the people of the United Kingdom was announced.

The decision to leave EU left most people around the globe in shock and distress. All of a sudden, the world seemed a different place, more alienated, aloof, and vulnerable.

This was the impact of United Kingdom’s decision to leave EU, which was felt in every segment. And, the global forex and other financial markets were no different.

The severity of the impact was increased significantly, since the decision came in as a big surprise, something nobody believed could actually happen. Everyone witnessed the event and considered it to be history in the making.

Impact on Forex Market and Financial Markets

During the pre-referendum period, many analysts and experts predicted the various possible adverse impacts on the forex market if the British people voted in favor of leaving the European Union.

However, none of them was perhaps as drastic or dramatic as the actual events that took place and shook the global forex market.

The most notable event in the forex market that set the course of more such events to happen was the fall of British pound by 10%, to touch the level of 1.3230. This was the highest single day decline since the infamous great fall of British Pound in 1985.

Following the similar trend, the euro also took a massive battering and fell by 4% to close the day at the level of 1.0945 to the dollar.

During the entire first trading session after the Brexit verdict, the tone of the market was very much set for a beating from all directions.

Furthermore, EUR/JPY also witnessed a severe hammering and reached the lowest level in the last fifteen years.

As a result, the Japanese Yen jumped against US Dollar and crossed past 100 mark for the first time in three years.

The Euro to British Pound tagging saw Euro gaining strength, as investors were just not ready to accept that the decision of leaving European Union has become a stark reality.

Like the forex market, the stocks and other financial markets across the world were rudely awakened when the Brexit decision was announced.

Most of the stock markets around the world received major battering, and it was carnage of bulls in the hands of bears and the tremors spread in all the corners.

History was created in many unwanted ways. The FTSE tumbled by 9% with practically total absence of buyers. Similarly, S&P dropped by more than 5%, which is its biggest fall in many years.

The similar chaotic situation was seen on the trading floors all across Asia as well. Starting from Nikkei, it translated the impact to all the major markets, including ASX, Hang Seng, Shanghai, Taiwan and Mumbai, none of them was able to make a failed attempt in stopping the annihilation.

Future Course of the Forex Market and the Financial Markets

The Brexit verdict has suddenly made Europe and consequently the entire world to become unknown territory.

It is something the global investors are quite averse to and therefore, it is a strong possibility that both the British pound and the Euro will remain under heavy pressure, especially in the near future.

Investors are expected to seek for the calmer waters and park their funds in relatively safer currencies that are least likely to get impacted by this event.

These would include US Dollar, Japanese Yen and Swiss Franc.

Despite the initial hammering of the British Pound as well as Euro, it can be considered a realistic outcome that they are up for further decline in the immediate future.

The uncertain situation looming on most of the global financial markets is expected to continue and even deepen further in some cases. Worse still, the world may see another major recession.

The stock market could recover some of the losses, but it could be very difficult to make any significant improvement in the near future.

Brexit Impact on British Economy

Many analysts have pointed to a considerable damage to the British economy, which could last for a long time.

Photo via @CNNMoney

In recent years, as a net importer, Britain faced a negative balance of trade within the European Union.

With an extreme economic decline in Britain already happening as well as further reduction in value expected in future, the result will see imports becoming much more expensive.

Consequently, inflation will be higher and the interest rates will have to follow the suite. The higher interest rates will reduce the country’s economic activities and this impact will be blended with overall skeptic approach of the investors.

The declining value of British Pound will have a negative impact on GDP as well. Thus, the troubled days for the United Kingdom are far from over.

On the face of it, one may think that immigration related issues will now be resolved and thus, the illustrative expenses bill will also be reduced. However, the overall impact on the British economy will definitely be adverse.

Conclusion

History has been made. The people of the United Kingdom have not just voted to leave the EU; they have actually voted for a prolonged uncertain situation to loom over all the major economies of the world.

It is expected to serve as a paradigm shift and a major news maker in the world.

Is this voting going to be a lose-lose situation or there will something better coming out of it?

It is yet to be seen and things will be clear to us in the days to come.