Expect more central bank easing, strength in yen, greenback and gold post Brexit, say experts

SINGAPORE (June 24): The UK officially decided to leave the European Union on June 23, with leave votes trumping remain by 51.9% to 48.1%. A total of 33.5 million voted. Mayhem ensued in the markets, with the British pound dropping more than 10% to a 30-year low of 1.32 against the US dollar and the Japanese yen strengthening 6.6% past 100 during the day.

Gold rose to US$1,315 per ounce, while Brent crude dropped to US$48 a barrel, weighing on commodity currencies like the Canadian dollar, Australian dollar and Malaysian ringgit. Finally, UK Prime Minister David Cameron stunned markets with his resignation, saying that the UK now required “fresh leadership” as it steers a new course.

“Brexit came as a surprise as the market had turned up on expectations that the UK would remain in the EU following the murder of Jo Cox. The betting polls also suggested the remain camp had a strong lead over leave. This explains the strong reaction from the market today,” says Sue Ann Lee, UOB economist. Over the short term, she expects US Treasuries and gold to continue rallying, while global equities will weaken.

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